Established in 2019, the Climate Financial Risk Forum (CFRF) brings together senior financial sector representatives to share their experiences in managing climate-related risks and opportunities.
It is jointly 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).
The CFRF 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
CFRF – Session 3
Session 3 of the CFRF began on 27 April. The session will run for approximately 12 months.
The forum membership for Session 3 refreshed around half of the Forum membership to ensure it still reflects the industry and brings in new viewpoints and relevant expertise. As with Sessions 1 and 2, the CFRF membership includes a diverse representation of financial institutions including UK-regulated banks, insurers, asset managers, asset owners, and public/private organisations.
|Federated Hermes||Asset manager|
|GAM Investments||Asset manager|
|Royal London Asset Management||Asset manager|
|Universities Superannuation Scheme||Asset manager|
|Coventry Building Society||Bank|
|Lloyd's of London||Insurer|
|Phoenix Group Holdings plc||Insurer|
|RSA Insurance Group||Insurer|
|Green Finance Institute||Other|
|London Stock Exchange Group||Other|
|UK Centre for Greening Finance and Investment||Other|
There are three working groups: 1) data, disclosure and metrics, 2) scenario analysis, and 3) the transition to net zero.
Each 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.
The data, disclosure and metrics, and scenario analysis working groups will build on the work of the previous sessions. The transition to net zero working group will complement other workstreams on the topic including the UK-Government-convened Transition Plan Taskforce (which the FCA attends), and the Glasgow Financial Alliance for Net Zero (GFANZ).
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 for launch in the first half of 2022. Firms will be able to input some basic information on their business activities, products, or risks, to get a description of climate risks and opportunities.
While we have convened and facilitated CFRF discussions, we and the PRA do not accept liability for the views expressed in the Session 2 guides. They do not necessarily represent the view of the regulators and do not constitute regulatory guidance. They 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 designed to enable firms to overcome the significant challenges 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.
Members of the CFRF presented and discussed the deliverables of Session 2 and the issues they raised in a webinar.
CFRF meetings and background
The CFRF meets three 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.