Featured Product

    CFRF Publishes Guides to Manage Financial Risks from Climate Change

    October 21, 2021

    The working groups of the Climate Financial Risk Forum (CFRF) published a second round of guides (or Session 2 guides), written by the industry for the industry, to help financial firms manage climate-related financial risks. CFRF is an industry forum jointly convened by the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA). The guides, which build on a guide that was published in June 2020, focus on risk management, scenario analysis, disclosure, innovation, and climate data and metrics. Various CFRF working groups have published ten different outputs in total.

    The key outputs from the CFRF working groups, also known as the Session 2 guides, can be summarized as follows:

    • The Risk Management Working Group (RMWG) has developed guides on developing climate risk appetite statements and risk management use cases. Additionally, the Risk Management Working Group has produced a paper that summarizes a firm’s training needs for climate risks and opportunities and how they could be delivered as a coherent syllabus.
    • The Scenario Analysis Working Group (SAWG) has produced practical examples on how firms can incorporate sector specific points when developing an effective approach to scenario analysis. The Scenario Analysis Working Group will publish a publicly available online scenario analysis tool in the first quarter of 2022. The tool will be designed for use by smaller firms who may not have the experience or resources to attempt independently. The idea of the tool is that firms would input some basic information regarding their business activities, products, or risks into the tool, to then output a narrative description of climate risks and opportunities.
    • The Disclosure Working Group (DWG) has collated a number of case studies on disclosure from a variety of organizations that will be of interest to firms as they develop their approach to climate-related disclosures. The Working Group has also produced guidance highlighting the legal risks associated with publishing a climate-related disclosure and how these risks can be effectively managed.
    • The Innovation Working Group (IWG) has focused on identifying and sharing practical opportunities to mobilize financial capital and steward an economy-wide transition to meet climate targets and the resultant briefing paper highlights the key points. Additionally, the Innovation Working Group have produced a set of seven short films highlighting innovative approaches to mobilizing finance in support of the transition to net-zero.
    • CFRF published a guide on climate data and metrics which recommends five areas where climate-related metrics could be employed: transition risks, physical risks, portfolio decarbonization, mobilizing transition finance, and engagement. The first part of the report provides detail on each of these areas. The second part focusses on implementation and provides practical guidance and support on convergence towards a set of common and consistent climate metrics.

    Many of the Session 2 guides will help firms accelerate their efforts in responding effectively to climate-related financial risks and opportunities. In particular, the risk appetite statements, scenario analysis guide, disclosure case studies, and the climate data and metrics dashboard have been deliberately designed to enable firms to overcome the significant challenges that they have encountered in embedding climate risk management in their organizations. The Innovation report provides commentary on actionable innovation opportunities to mobilize financial capital and help steward the economy to net zero.

     

    Related Links

    Keywords: Europe, UK, Banking, Insurance, Securities, Climate Change Risk, ESG, Disclosures, Scenario Analysis, Risk Appetite, CFRF, Stress Testing, FCA, PRA

    Featured Experts
    Related Articles
    News

    EBA Clarifies Use of COVID-19-Impacted Data for IRB Credit Risk Models

    The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.

    June 21, 2022 WebPage Regulatory News
    News

    EP Reaches Agreement on Corporate Sustainability Reporting Directive

    The European Council and the European Parliament (EP) reached a provisional political agreement on the Corporate Sustainability Reporting Directive (CSRD).

    June 21, 2022 WebPage Regulatory News
    News

    PRA Consults on Model Risk Management Principles for Banks

    The Prudential Regulation Authority (PRA) launched a consultation (CP6/22) that sets out proposal for a new Supervisory Statement on expectations for management of model risk by banks.

    June 21, 2022 WebPage Regulatory News
    News

    EC Regulation Amends Standards for Calculating Credit Risk Adjustments

    The European Commission (EC) published the Delegated Regulation 2022/954, which amends regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.

    June 21, 2022 WebPage Regulatory News
    News

    BIS Hub Updates Work Program for 2022, Announces New Projects

    The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.

    June 17, 2022 WebPage Regulatory News
    News

    EIOPA Issues Cyber Underwriting Proposal, Statement on Open Insurance

    The European Insurance and Occupational Pensions Authority (EIOPA) published two consultation papers—one on the supervisory statement on exclusions related to systemic events and the other on the supervisory statement on the management of non-affirmative cyber exposures.

    June 17, 2022 WebPage Regulatory News
    News

    US Senate Members Seek Details on SEC Proposed Climate Disclosure Rule

    Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)

    June 16, 2022 WebPage Regulatory News
    News

    EIOPA Consults on Review of Securitization Framework in Solvency II

    The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.

    June 16, 2022 WebPage Regulatory News
    News

    UK Authorities Issue Regulatory and Reporting Updates for Banks

    The Prudential Regulation Authority (PRA) issued a statement on PRA buffer adjustment while the Bank of England (BoE) published a notice on the statistical reporting requirements for banks.

    June 15, 2022 WebPage Regulatory News
    News

    BCBS Issues Climate Risk Principles while HKMA Expresses Its Support

    The Basel Committee on Banking Supervision (BCBS) issued principles for the effective management and supervision of climate-related financial risks.

    June 15, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8280