BoE to make green gilts eligible for QE

The move caters to high demand for environmentally friendly investments

The Bank of England (BoE) revealed on Friday that it plans to buy new green gilts issued by the UK government later in 2021.

The move is part of the central bank’s asset purchase programme, which considers the gilts to be the same as other government debt.

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In an effort to cater for high demand for environmentally friendly investments, the UK government intends to issue a minimum of £15bn of new debt during the current financial year.

David Barmes, Senior Economist at Positive Money, welcomed the Bank’s decision to make green gilts eligible across its operations. “The Bank should now go a step further and consider actively favouring green gilts in order to support green government spending and fulfill its mandate to support the net zero transition,” Barmes said.

Barmes also drew attention to other European nations which have been quicker out of the box.

“Compared to countries like France and Poland, the UK has been relatively slow to start issuing green bonds. With a huge green investment gap to fill ahead of COP26, the Bank and the Treasury should closely coordinate on how the government can rapidly expand its green spending while keeping borrowing costs low.”

The Bank of England confirmed that the green gilts will be equally eligible to already existing gilts. They can also be used as collateral in other BoE operations by banks.

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