How the Bank of England Is Cutting Off Financial Support for Coal
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📰 The quick summary: Starting in October, the Bank of England will stop accepting coal-linked bonds as collateral for loans to commercial banks, sending a clear signal to the financial sector that coal assets carry serious climate risk.
📈 One key stat: About 150 of the world’s largest financial companies already have some restrictions on doing business with the thermal coal industry, showing growing momentum to cut ties with one of the most polluting fossil fuels.
💬 One key quote: “It’s a strong signal from a central bank, and to the market as well,” said Ellie McLaughlin, a senior policy and advocacy manager at the campaign group Positive Money.
1️⃣ The big picture: Thermal coal, burned in power plants to generate electricity, ranks among the most polluting fossil fuels on the planet, and financial institutions are increasingly under pressure to limit their exposure to it. Starting in October, the Bank of England will no longer allow commercial banks to use coal-linked bonds as collateral when borrowing from the central bank, a mechanism banks rely on to keep daily operations running smoothly. Behind this decision is a straightforward financial logic: as the global economy shifts away from fossil fuels, bonds tied to thermal coal risk losing their value and becoming liabilities on central bank balance sheets. Climate campaigners have welcomed the move as a victory, noting that it goes further than the policies currently in place at most western central banks, including the European Central Bank. Announced quietly on the Bank of England’s website in early June, the policy has now drawn wider attention and sparked calls for even broader restrictions.
2️⃣ Why is this good news: By refusing to treat coal-linked bonds as reliable collateral, a major central bank is formally recognizing that fossil fuel assets carry real financial risk tied to the global clean energy transition. Campaigners hope the move will push commercial banks to reconsider holding coal-linked assets on their own balance sheets, accelerating the withdrawal of financial support from one of the dirtiest energy sources. At a time when the US-led backlash against green policies has made climate action more difficult globally, a significant institution stepping up sends an important counter-signal to markets and policymakers alike. With around 150 of the world’s largest financial firms already placing some limits on their coal business, this decision adds institutional weight to a growing trend of financial divestment from coal. Scaling up this kind of policy across central banks could meaningfully shrink the flow of capital keeping coal-powered energy alive, helping accelerate the clean energy transition.
3️⃣ What’s next: Climate advocates are pushing for the Bank of England to extend similar restrictions beyond thermal coal to cover all fossil fuel expansion and deforestation-linked assets. How the Bank calculates risk-adjusted discounts, known as haircuts, for climate-exposed bonds will determine how impactful the policy really is. Campaigners also hope other central banks, including the European Central Bank, take note and adopt comparable measures.
Read the full story here: The Guardian – Bank of England to stop accepting bonds linked to coal for key loans
