Banks and insurers called to action on climate change

With the deadline for implementation of the Prudential Regulation Authority’s supervisory statement on managing the financial risks from climate change now past, certain requirements should already be in place. But financial institutions need to recognise this is just the beginning, stress Carlos Sanchez and Alexandra Chittock.

Carlos Sanchez (carlos.r.sanchez@willistowerswatson.com) is director of climate resilience finance and Alexandra Chittock is executive director, FINEX, at Willis Towers Watson.

Increasing numbers of institutions are waking up to the financial services sector’s responsibility for mitigating against the risks of climate change, not least driven by guidance and requirements from the United Kingdom’s Prudential Regulatory Authority. The PRA’s supervisory statement (SS3/19) lies at the meeting point of two seismic forces affecting director liability today: climate change and the drive towards personal accountability at board level. Published in April of this year, the supervisory statement, among other things, seeks to increase individual directors’ liability for climate change and associated risks – leaving the onus on banks and insurers, for example, as to how to interpret its guidance and internally manage the risks associated with climate change. It also ties in with the Senior Managers Regime (SMR).