Climate change

Climate change, and society’s response to it, present risks relevant to the Bank’s objectives. The Bank is carrying out ongoing work to embed climate change into financial decisions and macroeconomic analysis.

Latest updates

18 September 2020: Jointly with the Bank of England, Financial Conduct Authority, Competition & Markets Authority, Payment Systems Regulator, Information Commissioner’s Office, Pensions Regulator, and HM Treasury (as observer member), we published an updated version of the Regulatory Initiatives Forum’s grid – a consolidated plan of initiatives that the authorities consider will, or may, have significant operational impact on firms across the next 24 months.

1 July 2020: We published a letter from Sam Woods to all PRA-regulated firms on ‘Managing climate-related financial risk – thematic feedback from the PRA’s review of firms’ SS3/19 plans and clarification of expectations’. We also published a speech by Sarah Breeden ‘Leading the Change: Climate Action in the Financial Sector’.

29 June 2020: The Climate Financial Risk Forum has published a guide written by the industry for the industry to help financial services firms approach and address climate-related financial risks.

Our response to climate change

The Bank’s response to climate change is motivated by its statutory objectives. The first involves promoting safety and soundness by enhancing the PRA’s approach to supervising the financial risks from climate change. The second involves enhancing the resilience of the UK financial system by supporting an orderly market transition to a low-carbon economy. We first set out our strategy for responding to these risks in an article published in the June 2017 edition of our Quarterly Bulletin.

We set up the Future of Finance project to look at how financial services might evolve over the next decade, and what this could mean for everyone who uses, provides or regulates them. Huw van Steenis led the review and published his findings and recommendations in June 2019. This included the recommendation for the Bank to promote the smooth transition to a low carbon economy. The Bank set out its response to that review and committed to take action to support an orderly transition.


The Governor of the Bank of England, Mark Carney, the executive sponsor of the Bank’s work in this area, Sarah Breeden, and other Bank seniors have discussed the financial risks from climate change and the Bank’s response in various speeches.

Speeches on climate change


Bank of England climate-related financial disclosure

The Bank published its own climate-related financial disclosure for the first time in June 2020. This sets out the Bank’s approach to managing the risks from climate change across its entire operations, and explains what it’s doing to improve its understanding of these risks. This forms part of the Bank’s work under its strategic goal on climate change. It reflects the importance that the Bank attaches to climate-related risk disclosure, and the high standards that it expects both of itself, and the firms it regulates.

Prudential supervision and climate change

The Bank’s initial focus was on the impact of climate change on the insurance sector, and the PRA published a report in September 2015.

PDFThe impact of climate change on the UK insurance sector

Subsequently, the Bank completed a review of the impact on the UK banking sector, which was published in September 2018. The report highlighted that a transition in thinking is taking place across the sector from viewing climate change as a potential reputational risk to a core financial and strategic risk.

Transition in thinking: The impact of climate change on the UK banking sector

Building on the insurance and banking reviews, in April 2019, the PRA published Supervisory Statement 3/19 ‘Enhancing banks’ and insurers’ approaches to managing the financial risks from climate change’. This SS was published alongside Policy Statement 11/19, addressing the responses to CP23/18.

Supervisory Statement 3/19 ‘Enhancing banks’ and insurers’ approaches to managing the financial risks from climate change’

Working with a group of representatives from the general insurance sector, in May, the PRA published the report ‘A framework for assessing financial impacts of physical climate change. A practitioner’s aide for the general insurance sector’. The paper outlines a framework for practitioners to use to assess climate-related financial risks, using tools that are already available within the general insurance sector. The framework is intended as a possible starting point for firms to assess the impacts in the context of their business decisions and disclosure requirements.

Climate Financial Risk Forum (CFRF)

The PRA, together with the FCA, has established a Climate Financial Risk Forum (CFRF) to build intellectual capacity and share best practice. The CFRF brings together senior representatives from across the financial sector, including banks, insurers, and asset managers. The forum has set up four working groups to produce practical guidance on four specific topic areas: risk management, scenario analysis, disclosure, and innovation. The final outputs will be shared with industry more widely.

Full background and information on the CFRF, its guide on how to approach and address climate-related financial risks, and summaries of meetings are available on the Climate Financial Risk Forum guide summary.

Stress testing and climate change

The Bank is utilising its stress testing framework to assess the impact of climate-related risks on the UK financial system. 

In June 2019, the PRA published details of its Insurance Stress Test for 2019, which included an exploratory exercise in relation to climate change. The set of climate scenarios explored the impacts to both firms' liabilities and investments stemming from physical and transition risks.

Building on the Insurance Stress Test, the Bank announced plans to test the UK financial system’s resilience to the financial risks from climate change as part of the 2021 Biennial Exploratory Scenario. This was set out in the July Financial Stability Report.

In December 2019, the Bank published a discussion paper setting out the proposal for the 2021 Biennial Exploratory Scenario (BES) on climate-related risks. The objective of the BES is to test the resilience of the largest banks, insurers and the financial system to different possible climate pathways and provide a comprehensive assessment of the UK financial system’s exposure to climate-related risks. The deadline for responses was 18 March 2020.

In June 2020, the Network for Greening the Financial System (NGFS) published a set of climate scenarios that will serve as the basis for the scenarios in the 2021 BES. For more information, please refer to the section on NGFS below.

Discussion paper: The 2021 biennial exploratory scenario on the financial risks from climate change

International climate-related initiatives

Central Banks and Supervisors Network for Greening the Financial System (NGFS)

The Bank of England is a founding member of the Central Banks and Supervisors Network for Greening the Financial System. The Network was formed in December 2017, at the One Planet Summit in Paris. It was co-founded by eight central banks and supervisors, and, as of July 2020, has 66 members and 13 observers.

The Bank chairs the NGFS workstream looking at sizing the risks from climate change to the financial system and macroeconomy. It actively contributes to the other workstreams on supervision of climate-related risks and scaling up green finance. In January 2019, the Bank hosted an NGFS conference on ‘the macroeconomic and financial stability impacts from climate change.’

In June 2020, under the Chairmanship of the Bank, the NGFS published a first set of climate scenarios alongside a first-of-its-kind Guide to climate scenario analysis for central banks and supervisors. The NGFS scenarios have been developed to provide central banks and supervisors, as well as financial firms and companies, a common starting point for analysing climate risks under different future pathways. These scenarios will also serve as a basis for the 2021 Biennial Exploratory Scenario (BES) on climate risks. The Guide provides practical advice on using scenario analysis to assess climate risks to the economy and financial system.

Other notable publications by the NGFS include its first comprehensive report, ‘A call for action – climate change as a source of financial risk’ from April 2019. The report sets out six recommendations for central banks, supervisors, policymakers and financial institutions to enhance their role in the greening of the financial system and the managing of climate and environment-related risks. Alongside the report, Mark Carney, former Governor of the Bank of England, Francois Villeroy de Galhau, Governor of the Banque de France, and Frank Elderson, Chair of the Network for Greening the Financial System (NGFS) wrote an open letter on climate-related financial risks. More recently, they and Andrew Bailey, Governor of the Bank of England, wrote an open letter arguing that the world must seize the opportunity created by the coronavirus outbreak to meet the climate challenge.

Sustainable Insurance Forum

The Bank also co-founded the Sustainable Insurance Forum (SIF). SIF is a global network of insurance supervisors and regulators, who are working together on sustainability challenges facing the insurance sector, including climate change.

Supporting enhanced disclosure

To allow markets to better assess, price and manage climate-related financial risks, the Financial Stability Board (FSB), at the request of G20 leaders, established the industry-led Task Force on Climate-related Financial Disclosures (TCFD). The Bank supports the TCFD, and has, for example, co-hosted a conference on scenario analysis in November 2017. 

The TCFD’s framework is increasingly becoming the global standard for climate disclosures. The Bank used this framework for its first climate-related financial disclosure as part of its annual reporting for the financial year 2019/20, setting out the Bank’s approach to managing the risk.

Research on climate change

The Bank has engaged in several research activities on climate change. 

In May 2016, we published a Staff Working Paper on the impact of climate change on central banks. It examines the channels via which climate change and policies to mitigate it could affect a central bank’s ability to meet its monetary and financial stability objectives.

In July 2016, we held a joint workshop with the Met Office on climate risk and financial stability.

In November 2016, we held a joint conference, 'Central banking, climate change and environmental sustainability’ with the Council on Economic Policies.

In January 2018, we published a Staff Working Paper on climate change and the macro-economy. The review focused on the key theoretical and empirical modelling issues in the analysis of the macroeconomic risks deriving from climate change.

In May 2018, we published a joint article in Nature Climate Change on the climate change challenges for central banks and financial regulators. The paper presents the key controversies in the central banks and regulators’ response to climate change, and discusses potential areas for future research and policy.

In October 2018, we published a Bank Underground article on the relationship between mortgage arrears and property energy ratings. Analysing borrower-level data, the research suggests that mortgages on efficient properties are less risky.

Reducing our environmental impact

We are also committed to running our own operations responsibly and sustainably. Our Greener Bank programme is aimed at reducing the environmental impact of our day-to-day operations.

Corporate responsibility at the Bank

This page was last updated 18 September 2020

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