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Managing Climate-Related Financial Risk

The Climate Risk Forum has published guides to help financial firms manage climate-related financial risk.

The CFRF has been running since March 2019 and is chaired jointly by the Prudential Regulation Authority and the Financial Conduct Authority, reflecting the importance of climate change to their respective strategic objectives.

The five CFRF working groups below are collectively publishing a total of 10 deliverables:

  • Risk Management. The outputs are designed to help retail banks, corporate banks, insurers and asset managers produce and implement risk appetite statements that integrate climate-related financial risks. The Risk Management Working Group has produced a paper summarising a firm’s training needs for climate risks and opportunities and how they could be delivered as a coherent syllabus.
  • Scenario Analysis. Practical examples on how firms can incorporate sector specific points when developing an effective approach to scenario analysis. The Scenario Analysis Working Group will publish a publicly available online scenario analysis tool in Q1 2022 – designed for use by smaller firms who may not have the experience or resources to attempt independently.
  • Disclosure. Case studies on disclosure from a variety of organisations that will be of interest to firms as they develop their approach to climate-related disclosures. The Disclosure Working Group have also produced guidance highlighting the legal risks associated with publishing a climate-related disclosure and how these risks can be effectively managed.
  • Innovation. Practical opportunities to mobilise financial capital and steward an economy-wide transition to meet climate targets and the resultant briefing paper highlights the key points. The Innovation Working Group have produced a set of 7 short films highlighting innovative approaches to mobilising finance in support of the transition to net-zero.
  • Climate Data and Metrics. The report on climate data and metrics recommends five areas where climate-related metrics could be employed: Transition Risks; Physical Risks; Portfolio decarbonisation; Mobilising transition finance and Engagement. The first part of the report provides detail on each of these areas. The second part focusses on implementation and provides practical guidance and support on convergence towards a set of common and consistent climate metrics.