It’s not easy being green – but that shouldn’t stop us: how central banks can use their monetary policy portfolio to support orderly transition to net zero Speech given by Andrew Hauser, Executive Director, Markets  At Bloomberg 21 May 2021  This speech launches, and draws heavily on, the Discussion Paper ‘Options for greening the Bank of England’s corporate bond purchase scheme’. That paper was produced by an internal team led by Matt Trott, and I am hugely grateful to him, Sadia Arif, Andrew Bailey, Ryan Barrett, Beth Blowers, Sarah Breeden, Jon Bridges, Rohan Churm, Eleanor Eden, Chris Faint, Bianca Ginelli Nardi, Maggie Illingworth, Zane Jamal, Josh Jones, Rebecca Maher, Nick McLaren, Tom McLaren, Rhys Philips, Dave Ramsden, Francine Robb, Philip Temme, Thomas Viegas and Sebastian Walsh for their input both to the Discussion Paper and this speech  1  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  Introduction I am delighted to be with you here today to launch our Discussion Paper on greening central bank asset portfolios. The Paper sets out our analysis and proposals in detail.
These are known as ‘transition risk’ and ‘physical risk’ respectively. In response, investors are increasingly keen to see those responsible for managing their savings take more forceful actions to support transition to net zero – channelling their holdings away from firms whose activities are seen as incompatible with that transition, and towards those whose are.10  For much of its history, the Bank of England has not itself been a direct investor in corporate assets. And, more recently, our primary engagement with the financial sector on climate issues has been to ensure that banks and insurers can manage their large transition and physical risks effectively, and in ways that do not threaten system-wide stability. In 2019 we became the first supervisory body globally to set formal expectations in this area. And this year we are conducting a system-wide exercise to assess its resilience to the sorts of climate scenarios shown in Chart 2.11  10  I discussed these trends in more detail in https://www.bankofengland.co.uk/-/media/boe/files/speech/2020/from-hot-air-to-cold-hardfacts-speech-by-andrew-hauser.pdf?la=en&hash=5D73B8F9748EC41ECFFAD676A6D1D71A93703E15 11 For more extensive information on the Bank’s work on climate change, see Climate change | Bank of England. 4  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  4  In 2016, however, the Bank’s Monetary Policy Committee (MPC) voted to purchase £ of sterling corporate bonds in the secondary market as part of a package of measures designed to ease monetary conditions following the referendum on leaving the European Union.