Tilt and run again - Bank of England is selling corporate bonds

The corporate bond portfolio is sized at £13.6bn and is being sold between Q4 2022 and early 2024. The BoE has made a commitment to green their corporate bond holdings, with a target initially to reduce the weighted-average carbon intensity by 25% by 2025, but ultimately to achieve net zero emissions within the portfolio by 2050.

The mechanism of differentiation will initially be to tilt holdings towards better performers in each sector, by adjusting the price the BoE is willing to pay for the debt of a given company.

Given the BoE has made a clear near-term target for reducing carbon intensity, and has now begun to sell bonds, the portfolio tilt will be accelerated.

We present the highest emitting issuers per sector within the holdings of the Corporate Bond Purchase Scheme, and their recent performance which shows the impact of QT flows to date.

About the authors

Josephine Richardson

Managing Director, Head of Research

Based in London, Jo leads AFII’s research and a global team supporting fixed income investors as they align their portfolios with climate and sustainability goals. She joined AFII after 18 years in fixed income markets at JPMorgan.

Johan Jarnmo

Associate Director, Portfolio Strategy

Johan develops tools and analytics that help fixed income investors invest in a climate- and nature-positive way, including AFII’s portfolio tools Co₂liseum and FIONA. He previously worked in Deloitte’s Risk Advisory practice.