Climate Financial Risk Forum

Overview

Since its inception in March 2019, the CFRF has set up four technical working groups on disclosure, scenario analysis, risk management and innovation. Each working group is chaired by a CFRF member and supported by an external secretariat. Membership consists of wider industry participants, including trade associations, to ensure the perspective of a broad range of firms is represented. Each working group has planned the approach they propose to take and the outputs they will deliver in terms of practical guidance/ best practice material.

View minutes of the meetings

Background and launch in March 2019

Climate change and society’s response to it presents financial risks and opportunities that are relevant to the PRA’s and FCA’s objectives. While these risks may crystallise in full over time, 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.

The objective of the CFRF is to build capacity and share best practice across industry and financial regulators to advance our sector’s responses to the financial risks from climate change.

It brings together senior representatives from across the financial sector, including banks, insurers, and asset managers. The forum also includes observers from trade bodies to represent a broader range of firms and ensure the outputs of the CFRF are communicated to their members.

The forum is chaired by Sarah Breeden (Executive Director of UK Deposit Takers, PRA) and Christopher Woolard (Executive Director of Strategy and Competition, FCA). It meets 3 times a year and reports to Sam Woods (CEO of the PRA and Deputy Governor at the Bank of England) and Andrew Bailey (chief executive of the FCA).

Climate Financial Risk Forum (CFRF) guide

On 29 June 2020 the CFRF published its guide to help the financial industry approach and address climate-related financial risks. The guide aims to help financial firms understand the risks and opportunities that arise from climate change, and support firms as they adapt their risk, strategy and decision-making processes to reflect climate-related financial risks.?

The guide considers how firms can plan for the impact of climate policies over different time horizons, assess their exposure to climate-related financial risks and adapt their businesses in response.?

This guide includes a summary co-produced by the PRA and the FCA. There are also four industry-produced chapters covering a range of topics:

• Risk management
• Risk management annex – list of data and tools provider
• Scenario analysis
• Disclosures
• Innovation

The PRA and FCA have convened and facilitated CFRF discussions but do not accept liability for the views expressed in this guide, which do not necessarily represent the view of the regulators and in any case do not constitute regulatory guidance. The guide is based on current good practice, which will continue to evolve. Firms will need to judge for themselves what a proportionate application of the guide’s recommendations means for them.?

The working groups recognise that embedding climate risk management will take a number of years. This guide represents a starting point for firms, highlighting how they can develop their capability and capacity over the coming years.

The CFRF will build on this guide, by developing new materials that progress the management of climate-related financial risks. Also, the CFRF will continue engage with firms on the issues they face and seek their views on areas where the recommendations could be developed further.

A webinar event was held on 29 June 2020 to mark the launch of the guide. A recording of the event?is available, along with the slides and video of welcoming remarks from Andrew Bailey (Governor of the Bank of England) and Chris Woolard (Interim CEO of the FCA).

Current membership