Today Tuesday 15 October 2019 is the deadline for PRA-regulated insurers and banks to submit an updated Senior Management Function (SMF) form, appointing a Senior Manager responsible for climate change risk. Banks and insurers must also have an initial plan in place to address the expectations of the PRA Supervisory Statement on Enhancing banks’ and insurers’ approaches to managing the financial risks from climate change SS3/19 published in April 2019.

The Supervisory Statement expects firms to fully embed consideration of the financial risks of climate change into governance frameworks. Firms are expected to identify, measure, monitor and report on their exposures and should use regular scenario analysis. Firms are also expected to develop and maintain an appropriate approach to disclosure of climate-related financial risks. This is not a straightforward task, but doing it well can set businesses up for long-term success.

"A new horizon brings new opportunities" - Mark Carney, Governor of the Bank of England

Following today, all insurers and banks will be tasked with embedding climate change considerations into their business in four key areas: governance, risk management, scenario analysis and disclosure.

This isn't the end of the road. In fact, it is just the beginning of a journey. The PRA will expect firms' practices in this area to develop and mature over time, and the PRA will continue to update its expectations. Firms will need to take into consideration the evolving understanding of what best practice looks like, as the sophistication of firms' approaches deepens, and regulatory requirements are strengthened.

"We expect this to be an iterative process, and approaches to mature over time as methodologies develop." - PRA Policy Statement PS11/19