Opening a new chapter of the regulatory response to a transition
to a low carbon economy, the Prudential Regulation Authority (PRA)
and Financial Conduct Authority (FCA) have set out their emerging
approaches to supervising financial services firms' management
of risks arising from climate change. Many of the regulatory focus
areas around governance, risk management, scenario
analysis and disclosure align to, and
have already been set out in the UK Green Finance Taskforce report,
the European Commission's in-flight legislative package on
Sustainable Finance and the voluntary Taskforce on Climate-related
Financial Disclosure (TCFD) guidelines. All that said, however, the
publications represent a significant step towards requiring banks,
insurers and investment managers to integrate climate change into
their enterprise-wide risk management practices. We can now expect
the regulators to clarify and finalise their approaches over the
course of 2019.
