On July 30, the Institute of International Finance (IIF) and International Swaps and Derivatives Association (ISDA), on behalf of their respective global financial services industry members, submitted comments on the Bank of England’s Consultation Paper 10/25, “Enhancing banks’ and insurers’ approaches to managing climate-related risks – Update to SS3/19”.
IIF and ISDA members welcome the Bank of England’s thoughtful and iterative approach to climate-related financial risk management over the past several years. We agree that industry practices and global standards have evolved since the release of SS3/19. However, climate risk assessment and management are extremely complex and evolving fields, so it is understandable that many firms across the industry are still working to further develop their understanding and approach.
Members support the PRA’s stated approach of considering climate-related factors as drivers of potential financial risks; however, there are certain proposals set out in the consultation that appear to deviate from this view and may require revision. More generally, the PRA could better demonstrate that it sees climate-related risk drivers as one component of wider risk management and governance.
We welcome the PRA’s intention to take a proportionate and risk-based approach, which is based on the materiality of climate-related financial risks to a firm, and provide suggestions on how this can be clearer and more explicit in the revised Supervisory Statement.
We observe that the PRA’s draft Supervisory Statement is significantly more detailed than the current SS3/19. In general, our members believe that the PRA’s approach has not become excessively prescriptive, which is welcomed.
The letter details specific feedback on each chapter of the PRA consultation paper, including on climate scenario analysis expectations, climate targets, data and implementation.