UK Regulators Host First Climate Financial Risk Forum

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On Friday 8 March, UK financial regulators, the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) hosted the first meeting of the Climate Financial Risk Forum (CFRF). The objective of the CFRF is to build capacity and share best practice across financial regulators and industry to advance financial sector responses to the financial risks from climate change.

The forum brings together senior representatives from across the financial sector, including banks, insurers, and asset managers to consider the risks of climate change. Climate change and society’s response to it presents financial risks that are relevant to the PRA’s and FCA’s objectives.

While these risks may crystallise in full over longer-time horizons, they are becoming apparent now. Firms are enhancing their approaches to managing these risks, but face barriers to implementing the forward-looking, strategic approach necessary to minimise the risks.

The CFRF aims to reduce these barriers by developing practical tools and approaches to address climate-related financial risks.

“Climate change has the potential to create significant financial risks for the firms the PRA regulates. The challenge we face in mitigating these risks is unprecedented, and we need to begin to act now if we are to ensure an orderly transition to a low-carbon economy.” said Sam Woods, Deputy Governor and CEO of the PRA.

“The first forum meeting today was an important step in tackling a major threat to the future stability of the financial system. The FCA and PRA have been working closely together, combining and building on our joint knowledge, to develop an approach which will enhance the UK financial system’s resilience to climate change.” said Andrew Bailey, Chief Executive of the FCA.

“The Climate Financial Risk Forum will seek to encourage approaches in the financial sector, managing the financial risks from climate change as well as supporting innovation in green finance.” he said.

Members of the Forum are representative of UK’s financial sector that vary in size, business model, and maturity of approach to climate-related risks. The full list of members is as follows:

BNP Paribas Aviva Blackrock Green Finance Institute
HSBC Legal & General Hermes London Stock Exchange Group
JP Morgan Lloyd’s of London Invesco
RBS RSA Insurance Group Schroders
Yorkshire Building Society Zurich Standard Life Aberdeen

At its first meeting, the forum decided to set up four working groups to focus on risk management, scenario analysis, disclosure, and innovation. Each working group will be chaired by a member of the forum and will meet more frequently than the CFRF, reporting back at each CFRF meeting.

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