Several insurers joined the UK’s Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) last week to develop responses to the financial risks of climate change at the first meeting of the Climate Financial Risk Forum (CFRF).
Representatives from Aviva, Legal & General, Lloyd’s of London, RSA Insurance Group, and Zurich came together with other companies from across the financial sector to support the CFRF’s objective of building capacity and sharing best practices.
The forum also aims to reduce the barriers to firms implementing strategies that minimise climate risk by developing practical tools and approaches.
It is chaired by Sarah Breeden, Executive Director of International Banks Supervision, PRA, and Christopher Woolard, Executive Director of Strategy and Competition, FCA.
The CFRF will meet three times a year, reporting to Sam Woods, CEO of the PRA and Deputy Governor at the Bank of England, and Andrew Bailey, CEO of the FCA.
“The first forum meeting today was an important step in tackling a major threat to the future stability of the financial system,” said Bailey.
“The FCA and PRA have been working closely together, combining and building on our joint knowledge, to develop an approach which will enhance the UK financial system’s resilience to climate change,” he continued.
“The Climate Financial Risk Forum will seek to encourage approaches in the financial sector, managing the financial risks from climate change as well as supporting innovation in green finance.”
Woods also commented: “Climate change has the potential to create significant financial risks for the firms the PRA regulates. The challenge we face in mitigating these risks is unprecedented, and we need to begin to act now if we are to ensure an orderly transition to a low-carbon economy.”
“The establishment of the Climate Financial Risk Forum will provide a platform through which the PRA, FCA and industry can share experience and build expertise as we begin this work,” he explained.
At its first meeting, the forum decided to set up four working groups to focus on risk management, scenario analysis, disclosure, and innovation, with the aim of producing practical guidance on each of the focus areas.
