(Bloomberg) -- The Bank of England is facing pressure from green campaigners to revise its pandemic rescue program after research showed it's effectively subsidizing polluting industries while claiming tackling climate change is a priority.
The central bank's 20 billion pound ($26 billion) Corporate Bond Purchase Scheme favors carbon intensive industries such as energy production and manufacturing, according to a report led by the New Economics Foundation on Tuesday. Protesters wearing masks of Governor Andrew Bailey will gather outside the bank on Thursday, when policy makers are due to make their next decision on interest rates.
So far, the bond program has pumped 11.4 billion pounds of new money into the dirtiest sectors, though they offer marginal contributions to the U.K. economy, the report said. Around 57% of the value of the bonds purchased are from the most carbon intensive sectors, but they only represent 13.8% of overall employment and contribute 19% to gross value added.
A report published in June showed that the BOE's corporate asset holdings -- which make up a relatively small part of its portfolio -- are consistent with a temperature increase of 3.5 degrees Celsius above pre-industrial levels by 2100. That far exceeds the Paris Agreement to keep global warming well below 2 degrees, striving for 1.5 degrees Celsius.
A Bank of England spokeswoman declined to comment. The BOE enjoys operational independence from the U.K. government.
Prime Minister Boris Johnson has said tackling climate change should be one goal of Britain's pandemic recovery program and last month Bailey said the central bank will endeavor to incorporate climate impacts into its bond buying when the current pressure on resources caused by the pandemic abates.
Bailey's predecessor at the BOE, Mark Carney, repeatedly warned climate change is a “tragedy of horizon,” because its full-impacts fall beyond the typical short-term timescales evaluated by bankers, creditors, insurers.
Read more: BOE Will Address Climate Issues in Bond Buying, Bailey Says
The BOE's bond purchases seek to have a neutral effect on the market, by replicating its current breakdown. But this approach lowers the cost of borrowing for high emitting industries, reproducing existing market failure to price in climate change, the report said.
“The structural carbon bias in the CBPS is not only at odds with the government's climate goals but fails to reflect the financial risks associated with the transition to a low-carbon economy,” said the report. It urged the bank to adopt a program that would boost green investments.
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