Bank of England Bans Thermal-Coal-Linked Bonds as Collateral

The Bank of England announced that, effective October 2026, it will no longer accept bonds linked to thermal coal as collateral for the central-bank loans it provides to commercial banks such as Barclays, Lloyds, NatWest and HSBC. The move treats thermal-coal-linked bonds as “too risky” for the Bank’s balance sheet because a global shift toward net-zero energy could erode their value.

The Guardian

Thermal coal—burned in power plants to generate electricity—has long been a focus of climate-policy campaigns. A September report by the Paris-based non-profit Reclaim Finance indicated that roughly 150 of the world’s largest financial firms already impose some restrictions on dealings with the thermal-coal sector. The Bank’s new rule is stricter than the collateral policies of most Western counterparts, including the European Central Bank. The policy was posted quietly on the Bank’s website in early June 2026, with little public fanfare.

The Guardian

In its policy statement, the Bank explained that thermal-coal companies “can be exposed to potential financial risks connected to the adjustment of the economy towards net zero.” It added that the Bank would also discount the value of bonds in other relevant sectors “to protect the Bank against financial risks.” The announcement was framed as a risk-management measure rather than a climate-policy declaration.

The Guardian

Campaign group Positive Money welcomed the decision but warned that its impact will depend on implementation details. Critics argue that the Bank has not clarified how it will calculate “haircuts” for climate-related risk and that exclusions should extend beyond thermal coal to cover all “always harmful” activities, including fossil-fuel expansion and deforestation.

The Guardian

• “It’s a strong signal from a central bank, and to the market as well,” — Ellie McLaughlin, senior policy and advocacy manager, Positive Money

The Guardian

• “The Bank of England has been much less vocal about this and its wider climate work in recent years, for kind of various reasons,” — Ellie McLaughlin

The Guardian

• “We’ve yet to see how the Bank will calculate haircuts to account for climate risks, and exclusions should extend beyond thermal coal to cover all ‘always harmful’ activities,” — Ellie McLaughlin

The Guardian

• “It’s quite significant, but there are definitely a lot of areas where the Bank could be going further.” — Ellie McLaughlin

The Guardian