The CFRF, co-chaired by the FCA and the Prudential Regulation Authority (PRA), builds capacity and shares best practice across financial regulators and industry, to advance our sector’s responses to the financial risks from climate change.
Close collaboration between regulators and industry is crucial to:
- drive best practice
- make sure that firms can manage the risks arising from climate change and take advantage of opportunities to benefit consumers
- support the transition to net zero
In 2019, we established the CFRF with the PRA, to bring together senior financial sector representatives to share their experiences in managing climate-related risks and opportunities.
The CFRF set up 4 working groups on disclosures, 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 make sure that a broad range of firms is represented.
CFRF guide to climate-related financial risk management
Published in June 2020, the CFRF guide aims to help financial firms understand the risks and opportunities that arise from climate change, and provides support for how to integrate them into their risk, strategy and decision-making processes.
As part of this, the guide considers how firms can plan for the impact of climate policies and assess their exposure to climate-related financial risks, so that they can adapt their businesses in response.
The guide contains 4 industry-produced chapters and a summary, which we co-produced with the PRA. The chapters include:
- Scenario Analysis
- Risk Management (and Risk Management Annex: list of data and tools providers)
Please note that while we and the PRA have convened and facilitated CFRF discussions, the views in this guide don’t necessarily represent the views of the regulators and don’t constitute regulatory guidance.
Session 2 guides
On 21 October 2021 the CFRF published its second round of guides (Session 2 guides) to help the financial sector develop its approach to addressing climate-related financial risks and opportunities. These guides incorporate best practice and are written by industry, for industry. The Session 2 guides are focussed on risk management, scenario analysis, disclosure, innovation, and climate data and metrics and build on the guide that was published on 29 June 2020.
A total of 10 different outputs have been published by the various working groups and are provided below:
- Risk Management – Risk appetite statements
- Risk Management - Use cases
- Risk Management – Climate risk training
- Scenario Analysis – Implementation guide
- Scenario Analysis – Data and tools providers spreadsheet
- Disclosure – Case studies
- Disclosure – Managing legal risk
- Innovation – Commentary report
- Innovation – Case study videos
- Climate Data and Metrics - Guide
The CFRF Scenario Analysis Working Group is also developing an online climate scenario analysis narrative tool to support smaller firms, planned to launch in the first quarter of 2022. The idea of the tool is that firms would input some basic information regarding their business activities, products, or risks into the tool, to then output a narrative description of climate risks and opportunities.
The PRA and FCA have convened and facilitated CFRF discussions but do not accept liability for the views expressed in the Session 2 guides, which do not necessarily represent the view of the regulators and do not constitute regulatory guidance. The guides are based on current good practice, which will continue to evolve.
Many of the Session 2 guides will help firms accelerate their efforts in responding effectively to climate-related financial risks. In particular, the risk appetite statements, scenario analysis guide, disclosure case studies and the climate data and metrics dashboard have been deliberately designed to enable firms to overcome the significant challenges that they have encountered in embedding climate risk management in their organisations. The Innovation chapter provides commentary on actionable innovation opportunities to mobilise financial capital and help steward the economy to net zero.
CFRF meetings and background
The CFRF meets 3 times a year and is chaired by Sarah Breeden (Executive Director of UK Deposit Takers, PRA) and Sheldon Mills (Director of Strategy and Competition, FCA). It reports to Sam Woods (CEO of the PRA and Deputy Governor at the Bank of England) and Nikhil Rathi (Chief Executive of the FCA).
You can read the minutes from previous meetings below.
|Banks||Insurers||Asset managers||Pension funds||Other|
|BNP Paribas||Aviva||Blackrock||Church of England Pensions Board||Green Finance Institute|
|HSBC||Legal & General||Hermes||Universities Superannuation Scheme||London Stock Exchange Group|
|JP Morgan||Lloyd's of London||Invesco|
|RBS||RSA Insurance Group||Schroders|
|Yorkshire Building Society||Zurich||Standard Life Aberdeen|