Climate change is one of the defining issues of our time. We
recognise it presents far-reaching financial risks relevant to
our mandates from both physical factors, such as extreme weather
events, and transition risks that can arise from the process of
adjustment to a carbon neutral economy. Companies should consider
the likely consequence of climate change on their business
decisions, in addition to meeting their responsibility to
consider the company’s impact on the environment. Financial risks
will be minimised by achieving an orderly transition and via a
collective response. We welcome the action being taken as part of
the UK’s Green Finance Strategy to ensure a coordinated approach
and look forward to further collaboration to advance progress in
the near term on climate-related issues.
Sam Woods, Deputy Governor for Prudential Regulation and
Chief Executive Officer of the Prudential Regulation Authority
said:
“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
carbon-neutral economy. We will play
our part and work with government, fellow regulators and industry
through the UK Government’s Green Finance Strategy, the Climate
Financial Risk Forum, and the Network for Greening the Financial
System.”
Andrew Bailey, Chief Executive Officer of the Financial
Conduct Authority said:
“Climate change and the transition to a low-carbon economy
will transform financial services markets and shape consumer
priorities and needs. This brings unprecedented challenges for us
in mitigating risks and enabling positive changes. Working with
other regulators and government is an essential part in our
approach to successfully tackling these challenges. We welcome
the shared understanding of the nature, importance and urgency of
financial risks of climate change amongst the regulators and
government.”
Sir Win Bischoff, Chair of the Financial Reporting
Council said:
“The effect of climate change on society and business is
one of the defining issues of our time. As well as reporting on
their impact on the environment, public companies and their
Boards should address the impact of climate change on their
business. The FRC is pleased to play its part in supporting the
UK’s Green Finance Strategy in co-operation with other
regulators. Today we are outlining our actions to encourage and
monitor companies’ responses.”
Charles Counsell, Chief Executive of The Pensions
Regulator said:
“Climate change is no longer simply a social responsibility
issue. It is a core financial risk impacting broadly across
business, the economy and markets. Climate change is a risk to
long-term sustainability pension trustees need to consider when
setting and implementing investment strategy, while many schemes
are also supported by employers whose financial positions and
prospects for growth are dependent on current and future policies
and developments in relation to climate change. Tackling poor
standards of governance and risk management in pensions are
priorities for TPR and we welcome working together with other
regulators to address these challenges for pension
schemes.”
