We published one such measure in our 2020 TCFD20-aligned climate disclosure report21, which suggested that the CBPS – like the sterling corporate bond market it echoes – is aligned with an unsustainable 3.5°C. These metrics are promising, but very sensitive to their underlying assumptions: alternative measures for the same portfolio ranged from <1.75°C to 4°C (Chart 7). This degree of variation complicates their practical use for target setting. Chart 7: Uncertainties over implied temperature rise metrics  Source: The Bank of England's climate-related financial disclosure 2020  Some frameworks also advocate reserving a share of the portfolio to ‘green bonds’, or other assets linked directly to emissions-reducing activity. The market for sterling green bonds is currently small (Chart 8). But the planned launch of a new green gilt issuance programme should catalyse new corporate issuance, broadening the range of instruments available to sterling investors, including the CBPS. 20 21  Task force on Climate-Related Financial Disclosures: https://www.fsb-tcfd.org/ https://www.bankofengland.co.uk/-/media/boe/files/annual-report/2020/climate-related-financial-disclosure-report-2019-20.pdf. 12  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  12  Chart 8: Outstanding global green bonds by currency  Source: Bloomberg. Having set an overall target, our second and third tools – tilting and eligibility – will play the key role in influencing incentives for transition. We propose to tilt future CBPS purchases towards issuers which are performing relatively strongly in support of net zero, and away from those that are not.

Collating comprehensive metrics of this kind will not be straightforward, given the very uneven state of current company level reporting (Table 4). And any model-based substitutes would need to meet high standards of robustness and transparency. It is therefore possible that the initial approach may be relatively parsimonious, or vary by sector. Table 4: Climate data coverage for CBPS-eligible firms  14  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  14  Tilting CBPS purchases leaves the relevant bonds still eligible for purchase.23 In some cases, we may wish to go further and remove that eligibility. As I said earlier, eligibility criteria relating to the primary monetary policy objectives of the scheme and financial risk management will be retained. As we calibrate our new framework, we will consider whether these should be extended to include climate-related requirements. Chart 10: UK roadmap to mandatory TCFD-aligned disclosure24  Two immediate possibilities are covered in the Discussion Paper. The first relates to the potential to use CBPS eligibility criteria to help improve the coverage and quality of UK companies’ climate disclosures. Comprehensive disclosures are not only a critical building block for orderly transition – they would also help investors, including the Bank through the CBPS, to calibrate more effective tilts and other investment strategies. The Government has published a roadmap to mandatory TCFD-aligned 23  The current list of bonds eligible for the CBPS is available at: Documentation | Bank of England. https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/933783/FINAL_TCFD_ROADMAP.