By Zhuan Faraj
On 28 October 2021, the UK’s financial regulators (the Financial Conduct Authority (“FCA”), Prudential Regulation Authority (“PRA”), the Pensions Regulator (“TPR”), and Financial Reporting Council (“FRC”)) published a joint statement on the publication of Climate Change Adaptation Reports. These reports are pursuant to the Climate Change Act 2008, and have so far been published by the FCA, PRA, and TPR, with the FRC’s to come later this year.
The purpose of the reports is to set out how climate change affects the regulators’ respective responsibilities and the actions they, and the financial sector, are taking in response to it. A summary of each of the reports (as stated in the joint statement) is copied below:
FCA - “In the FCA’s report, we set out the steps we have seen the industry take to mitigate the risks climate change presents and we identify areas, such as retail investments and mortgages, where more needs to be done. Our assessment comes within the context of our developing strategic approach to climate change issues. This will see climate considerations embedded in everything we do, from how we operate, to our policy choices, to how we supervise and enforce against firms. Additionally, our report examines how the industry is making commitments to reach net-zero. We are keen to see these commitments put into action, backed up by appropriate governance and transition plans that will turn pledges into reality.” A copy of the report can be found here.
PRA – “In the PRA’s report, we set out the risks from climate change to our objectives and our response to them. This includes how climate-related financial risks affect the firms we regulate, our work to support and drive improvements in firms’ capabilities to manage these risks effectively, and our consideration of what further policy action may be necessary...” A copy of the report can be found here.
TPR - “In the TPR’s report, we will publish guidance clarifying what we will look for from schemes as they assess, manage and prepare to report on climate-related risk and opportunities. We will continue work with our regulated community to ensure our guidance is clear and easily adopted. To support trustees in meeting their duties, our proposed new code of practice will include several climate change modules. The draft proposals include a requirement that they assess climate-related risks and opportunities as part of their system of internal controls. We will work with the Department for Work and Pensions to share best practice in climate risk reporting. ” A copy of the report can be found here.
For further details a copy of the joint statement can be read in full here.