The Courier & Advertiser (Perth and Perthshire Edition)
Climate-change risks to be part of board discussions
The Bank of England could force board-level finance chiefs to manage climate-change risks.
The Bank’s supervisory Prudential Regulation Authority (PRA) has launched a consultation paper outlining how UK insurers, banks, building societies and investment firms must take a more hands-on approach to evaluating the costs of environmental change.
It includes requirements around scenario planning and financial-risk disclosures as well as corporate governance, stressing there should be clear board-level engagement on climate-risk planning.
“The PRA would also expect that the board and its subcommittees would have clear responsibilities for managing all of the financial risks from climate change, including individual responsibilities for the relevant existing seniormanagement function,” the regulator said.
The proposals are meant to force financial firms into crafting business strategies which would manage “far-reaching and foreseeable risks” of climate change.
The consultation paper follows a warning that only one in 10 banks are adequately prepared for climate change.
“Whilst these risks may crystallise in full over longer time horizons, they are becoming apparent now,” the PRA said.
“Firms are enhancing their approaches to managing these risks but more need to take a forward-looking, strategic approach if financial risks are to be minimised.”
A Bank of England survey last month found that around 30% of banks have included climate change in their Corporate Social Responsibility (CSR) models but that those efforts were mainly aimed at safeguarding their reputations.