19  10  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  10  Setting a target for the overall climate properties of the portfolio will help shape and steer our investment decisions, and provide transparency and accountability. At first sight, the framing of this target seems obvious: to achieve net zero by 2050. But 2050 is well beyond the likely lifespan of the CBPS. And ‘achieve net zero’ does not tell our staff which bonds to trade. So we need a nearer-term, intermediate, goal – in measurable units. The Discussion Paper considers a number of options (Chart 6). The first, a declining path for the carbon footprint of the portfolio, is simple to state and measure, and can be aligned with the Government’s target path to net zero. Implementing it at a more granular level is however complicated by the limited availability of appropriate sectoral pathways to net zero. Chart 6: Options for intermediate portfolio targets  11  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  11  A second, more forward-looking, approach would be to use an ‘implied temperature rise’ metric to target a declining temperature path. These convert data and projections of the current and future emissions of companies held in the portfolio into estimated future temperature levels, using assumptions about how those emissions compare to target paths.
This so-called ‘Corporate Bond Purchase Scheme’ (CBPS) was increased to £ in 2020, in response to the economic impact of Covid. It’s therefore fair to ask: as an investor in corporate assets in our own right, should we be taking steps to support the achievement of net zero? The Bank as investor: reconciling monetary policy goals and market mispricing  The first point to underscore is that the CBPS began as, and will remain, a monetary policy tool. That means that the overall target stock will continue to be set by the MPC to achieve its inflation objective. So, in due course, when the economic outlook allows, the fund will unwind. We do not expect to be a permanent investor. To achieve the policy goals of the Scheme, eligible bonds must be issued by non-financial companies making a material contribution to UK economic activity. And to protect public money, the Bank imposes controls on credit quality, portfolio concentration and other financial risks.12 These elements of the scheme will not change. A more interesting question relates to the composition of the CBPS. Up to now, we have aimed to replicate the structure of the sterling corporate bond market itself. We do that by dividing up our purchases across sectors according to the amount of debt outstanding; and within sectors using competitive reverse auctions. The rationale for allocating purchases in this way has been to minimise the impact of the CBPS on relative borrowing costs across sectors and firms.