The Bank of England has decided to stop accepting bonds tied to thermal coal as collateral for loans to commercial banks, a move climate campaigners are calling a major breakthrough. The ban takes effect in October and targets one of the dirtiest fossil fuels, still used widely in power generation.

In an announcement posted on its website in early June, the central bank said that thermal coal-related assets now pose "potential financial risks connected to the adjustment of the economy towards net zero".

As global finance shifts away from high-carbon industries, such bonds could lose value, making them too risky for the Bank's balance sheet.

Under the new rule, high-street lenders like Barclays, Lloyds, NatWest and HSBC will no longer be able to pledge coal-linked bonds when borrowing from the central bank to manage daily liquidity. The Bank also said it would apply valuation discounts to other vulnerable sectors to shield itself from climate-related losses.

Ellie McLaughlin, a senior policy manager at Positive Money, called the policy "a strong signal from a central bank, and to the market as well". She noted that while around 150 major financial firms already restrict coal-related dealings, the Bank of England's stance is stricter than that of most Western peers, including the European Central Bank.

However, the move comes against a backdrop of rising political opposition to green finance, especially from the US under President Donald Trump, which McLaughlin said "makes that environment within which they operating much more difficult".

Activists also caution that the policy's real impact will hinge on its details. "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," McLaughlin added, pointing to fossil-fuel expansion and deforestation. "It's quite significant, but there are definitely a lot of areas where the Bank could be going further."