The Bank of England and UK financial regulator today told banks and insurers to press ahead with analysing the impact of climate change on their operations.
The Climate Financial Risk Forum (CFRF) — established by the BoE and Financial Conduct Authority (FCA) last year — published a guide setting out how financial firms can analyse and disclose risks from climate change and identify opportunities for new consumer products.
The CFRF’s guide, the first of its kind, sets out what the Bank of England expects from the firms it regulates but is not a set of mandatory rules. The forum said its guidance would be followed by targets on progress next year.
Sarah Breeden, the Bank of England’s co-chair of the forum, said firms should begin their analysis straight away. “It’s much easier said than done. It takes time to develop,” she said at a launch event for the guide.
Sheldon Mills, the FCA’s co-chair of the CFRF, said the financial services sector has “a significant role to play” if the UK is to meet its target of achieving net zero greenhouse gas emissions by 2050.
“The CFRF is a positive example of collaboration between regulators and industry to find common ways to overcome barriers to meeting this challenge,” he said.
Financial firms in the UK are already facing increased demands this year due to the coronavirus pandemic and the imminent transition away from the benchmark Libor interest rate.
Robin Penfold, a financial services partner at law firm TLT, said the pandemic had boosted momentum behind the push towards green finance.
“Not only is there increasing demand from consumers for green financial products, there is now a widespread consensus among businesses that prioritising green policies is the best way to drive the economic recovery,” he added.