Today the Climate Financial Risk Forum (CFRF) has published a guide written by industry for industry to help firms approach and address climate-related financial risks. The guide, the first of its kind, provides practical recommendations to firms of all sizes on disclosure of climate-related financial risks Climate Financial Risk Forum (CFRF) has published a guide; effective risk management; scenario analysis, and opportunities for innovation in the interest of consumers.
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The CFRF was jointly established in March 2019 by the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA), reflecting the importance of climate change to their respective strategic objectives. Its aim is to build capacity and share best practice across financial regulators and industry to advance the sector’s responses to the financial risks from climate change. Membership is drawn from a wide range of industry participants, to ensure the perspective of a broad range of firms is represented.
The objective of the guide is to help firms understand the risks that arise from climate change, and to provide support on how to integrate these risks into their strategy and decision-making processes. Each chapter within the guide provides practical tools, experience, knowledge and case studies, which firms can use as they develop their strategies, processes and approaches. The key areas are:
Addressing climate-related financial risk is an ongoing process and this guide could assist firms in doing this. The guide complements wider work from both regulators in this space. This includes the PRA’s supervisory expectations for banks’ and insurers’ approaches to managing financial risks from climate change as well as the FCA’s proposals to improve issuers’ climate risk disclosures through applying the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD).
The PRA and the FCA acknowledge that the financial services sector is facing significant challenges as a consequence of the pandemic. While Covid-19 represents a present risk, minimising the future risks from climate change requires action now. The regulators therefore remain committed to continuing to work together with industry on this important topic.
Sarah Breeden, the PRA co-chair of the CFRF and Executive sponsor for climate change, said “Climate change presents significant risks and opportunities for the financial sector. We warmly welcome the hard work of the CFRF members in putting together this ground-breaking guide to help industry navigate these new challenges. By providing practical assistance to help all financial firms develop workable solutions, today marks a significant step forward in building a UK financial system resilient to the risks from climate change and supportive of the transition to a net-zero economy”.
Sheldon Mills, the FCA co-chair of the CFRF and Interim Executive Director of Strategy and Competition, said: “Climate change represents an unprecedented challenge to the planet, and the financial services industry has a significant role to play if we are to meet the UK’s target of net zero by 2050. The CFRF is a positive example of collaboration between regulators and industry to find common ways to overcome barriers to meeting this challenge. The Guide will be a helpful tool for firms in seeking to address the risks and potential opportunities presented by the transition to net zero. We will continue to work through the forum to build upon this progress.”
Source: CFRF