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Bank of England plans to green up its corporate bond purchases

It will contribute to the nation’s aim to reach net-zero greenhouse gas emissions by 2050

The Bank of England (BOE) is currently looking for inputs to greening up its $28.2 billion corporate bond asset purchase program, according to the media. The firm disclosed a discussion paper last week. It stated that its considerations align with the UK’s commitment to reach net-zero greenhouse gas emissions by 2050 and a drop of 78 percent emissions by 2035 compared to that of 1990.

The paper noted that the government policy and the company actions are the primary drivers for a drop in carbon emissions and the crucial supporting role of lender and investors. In August 2016, the corporate bond purchase program was introduced as a part of a policy measure that helped ease monetary conditions in the country following Brexit.

The bank purchases investment-grade sterling corporate bonds only from companies deemed to make a material contribution to the UK economy. The program aims to be wound down once no longer needed. However, the bank does not expect to be a permanent investor in corporate bonds.

The investments of BOE are made across several sectors of the economy depending on the amount of eligible debt that is outstanding in each of them, thus minimising the relative borrowing costs across the sectors. The firm has also proposed to explore the four essential tools, namely portfolio targets, asset eligibility, tilting purchases and escalation, with the help of progressively more stringent requirements and repercussions for issues that do not meet them.

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