UK: financial risk from climate change - what the PRA expects from boards

The Prudential Regulation Authority has today published for consultation a draft supervisory statement setting out its expectations of firms in respect of their approach to managing the financial risks from climate change: see here (pdf). The accompanying press release is available here (pdf). The PRA's expectation of the board is explained as follows (see para. 3.4 of the draft supervisory statement):

The PRA expects firms to have clear roles and responsibilities for the board and its relevant sub-committees in managing the financial risks from climate change. In particular, the board and the highest level of executive management should identify and allocate responsibility for identifying and managing financial risks from climate change to the relevant existing Senior Management Function(s) (SMF(s)) most appropriate within the firm’s organisational structure and risk profile, and ensure that these responsibilities are included in the SMF(s)’s Statement of Responsibilities. The PRA expects to see evidence that the board and its relevant subcommittees exercise effective oversight of risk management and controls. Further, the PRA expects the board to ensure that adequate resources and sufficient skills and expertise are devoted to managing the financial risks from climate change."