Bank of England chief puts finishing touches on climate change legacy

With just a month left before he steps down as head of the Bank of England (BoE), Mark Carney is putting the finishing touches on his legacy at the British central bank.

Driving the news: The BoE laid out how it planned to test the resilience of the U.K.'s largest banks and insurers in increasingly threatening environmental scenarios. It’s a notable step for Carney who's "played a key role in highlighting financial risks from global warming," as Bloomberg notes.

• The "climate stress tests" will be in addition to the typical stress tests banks face, which examine whether they can withstand severe shocks to the global economy.

Why it matters: Central banks across the globe are paying more attention to the risks of climate change to financial institutions and the economy.

• Carney, who's replacing former New York Mayor Michael Bloomberg as UN special envoy for climate action and finance, has been one of the most outspoken central bankers on the topic of climate change. His time at the helm of the BoE will be remembered for that, just as much as it will be for monetary policy.
• What he's saying: "Climate change will affect the value of virtually every financial asset; the [test] will help ensure the core of our financial system is resilient to those changes," Carney said in a press release.

Yes, but: Banks can't pass or fail the test — and there are no guaranteed consequences if the central bank deems institutions' plans inadequate.

• Results will be "published in aggregate without naming individual institutions," though the "BoE is not ruling out naming and shaming individual companies in the future if it feels not enough action is being taken," according to the FT.

The big picture: The European Central Bank said last month it's considering a climate change component to its existing stress tests. Meantime, the central bank's new leader Christine Lagarde has vowed that the ECB will "step up" action on climate change.

• The Federal Reserve held its first-ever climate conference this year, though chairman Jerome Powell has been skeptical about the role monetary policy has when it comes to climate change.
• In a sign of growing interest, senators recently proposed legislation that would require the Fed to develop bank stress tests for climate risks, much like the BoE is doing.

The bottom line: Per Reuters, the BoE "will publish detailed scenarios for the test next April, which will be closely watched by central banks in other countries."

P.S. U.K. Prime Minister Boris Johnson and Chancellor Sajid Javid are reportedly close to choosing Carney's successor. (Bloomberg)

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