The Bank of England’s Prudential Regulation Authority has informed banks and insurance firms that it regulates that they will need to implement their climate change financial risk plans by the end of 2021.
Sam Woods, the Bank of England’s Deputy Governor for Prudential Regulation and CEO of the Prudential Regulation Authority, notified chief executive officers of firms that it regulates in a letter dated 1st July 2020.
The letter noted that in April 2019, the Bank of England issued a statement on improving firms’ approaches to managing climate-related financial risks.
In this April 2019 statement, firms were given until October 2019 to get an implementation plan in place.
This new letter sets out that firms’ implementation approaches should be fully embedded by the end of 2021.
The approach that firms take to mitigating climate risk should be proportional to their exposure to climate-related risk and the complexity of their operations.
As part of this, capital levels should be set at levels to adequately cover the regulated firm’s climate-change risk.The letter noted that the Climate Financial Risk Forum (CFRF) has produced guidance on climate disclosure and risk management. The Bank of England will also be providing additional guidance before the 2021 implementation deadline.