Banking in times of climate change : next steps for UK’s financial regulators

Abstract

The transition to net zero greenhouse gas emissions by 2050 requires a step change in bank lending behaviour. This policy report contributes to the wider sustainable development debate by investigating the next steps UK’s financial regulators need to take to tackle climate change via the banking sector. An in-depth analysis of various policy options shows that the current market-based approach is likely to be ineffective and more proactive and market-shaping policy tools are warranted. Therefore, the reconsideration of credit guidance policy tools is recommended. While more research is needed to establish the feasibility and effectiveness of these policies, they would clearly necessitate a paradigm shift in banking regulators’ currently dominant narrative.