Environmental groups have been campaigning to encourage banks and other financial institutions to divest from fossil fuels for years, with efforts growing stronger since the Covid-19 pandemic and the global push to transition away from oil, gas, and coal to renewable alternatives.
In June, the Bank of England quietly announced that it would no longer be accepting bonds ****** ociated with coal operations for key loan arrangements. The ban will be enforced from October. It is the latest move to encourage a shift away from thermal coal for electricity production. The Bank of England said it would no longer be allowing commercial banks to use bonds linked to thermal coal as "collateral" when borrowing money from the financial institution.
The move suggests that any bonds linked to thermal coal are now considered too risky to appear on its balance sheet, as consumers and governments worldwide call for a shift away from "the dirtiest fossil fuel". The rapid global transition to renewable energy could lead certain types of fossil fuels to depreciate in value over the coming decades, making them more of a financial risk.
The Bank of England stated that thermal coal companies "can be exposed to potential financial risks connected to the adjustment of the economy towards net zero," in its policy statement. It said it would also discount the value of bonds in other relevant sectors "to protect the Bank against financial risks".
It is common for the Bank of England to provide loans to major banks operating in the United Kingdom, including Barclays, Lloyds, NatWest, and HSBC, to help them settle transactions and conduct operations efficiently. To gain access to these loans, commercial banks must provide collateral as a guarantee, typically in the form of bonds.

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