Climate Financial Risk Forum

The Climate Financial Risk Forum (CFRF) is an industry forum jointly convened by the PRA and FCA to build capacity and share best practice 

Overview

Since its inception in March 2019, the CFRF has set up four technical working groups on disclosure, scenario analysis, risk management and innovation. Each working group is chaired by a CFRF member and supported by an external secretariat. Membership consists of wider industry participants, including trade associations, to ensure the perspective of a broad range of firms is represented. Each working group has planned the approach they propose to take and the outputs they will deliver in terms of practical guidance/ best practice material.

View minutes of the meetings

Background and launch in March 2019

Climate change and society’s response to it presents financial risks and opportunities that are relevant to the PRA’s and FCA’s objectives. While these risks may crystallise in full over time, they are becoming apparent now. Firms are enhancing their approaches to managing these risks, but face barriers to implementing the forward-looking, strategic approach necessary to minimise the risks. The CFRF aims to reduce these barriers by developing practical tools and approaches to address climate-related financial risks.

The objective of the CFRF is to build capacity and share best practice across industry and financial regulators to advance our sector’s responses to the financial risks from climate change.

It brings together senior representatives from across the financial sector, including banks, insurers, and asset managers. The forum also includes observers from trade bodies to represent a broader range of firms and ensure the outputs of the CFRF are communicated to their members.

The forum is chaired by Sarah Breeden (Executive Director of UK Deposit Takers, PRA) and Christopher Woolard (Executive Director of Strategy and Competition, FCA). It meets 3 times a year and reports to Sam Woods (CEO of the PRA and Deputy Governor at the Bank of England) and Andrew Bailey (chief executive of the FCA).

Climate Financial Risk Forum (CFRF) guide

Session 1 guides

On 29 June 2020 the CFRF published its guide to help the financial industry approach and address climate-related financial risks. The guide aims to help financial firms understand the risks and opportunities that arise from climate change, and support firms as they adapt their risk, strategy and decision-making processes to reflect climate-related financial risks. 

The guide considers how firms can plan for the impact of climate policies over different time horizons, assess their exposure to climate-related financial risks and adapt their businesses in response. 

This guide includes a summary co-produced by the PRA and the FCA. There are also four industry-produced chapters covering a range of topics:

The PRA and FCA have convened and facilitated CFRF discussions but do not accept liability for the views expressed in this guide, which do not necessarily represent the view of the regulators and in any case do not constitute regulatory guidance. The guide is based on current good practice, which will continue to evolve. Firms will need to judge for themselves what a proportionate application of the guide’s recommendations means for them. 

The working groups recognise that embedding climate risk management will take a number of years. This guide represents a starting point for firms, highlighting how they can develop their capability and capacity over the coming years.

The CFRF will build on this guide, by developing new materials that progress the management of climate-related financial risks. Also, the CFRF will continue engage with firms on the issues they face and seek their views on areas where the recommendations could be developed further.

A webinar event was held on 29 June 2020 to mark the launch of the guide. A recording of the event is available, along with the slides and video of welcoming remarks from Andrew Bailey (Governor of the Bank of England) and Chris Woolard (Interim CEO of the FCA).

Session 2 guides

On Thursday 21 October 2021 the CFRF published its second round of guides (Session 2 guides) to help the financial sector develop its approach to addressing climate-related financial risks and opportunities. These guides incorporate best practice and are written by industry, for industry. The Session 2 guides are focussed on risk management, scenario analysis, disclosure, innovation, and climate data and metrics and build on the guide that was published on 29 June 2020.

A total of eleven different outputs have been published by the various working groups and are provided below:

A webinar event was held on Thursday 21 October 2021 to mark the launch of the Session 2 guides. A recording of the event, along with the slides and transcript, are available on the FCA’s website. Please note that you will need to register first in order to view the material.

During Session 2 of the Forum, the CFRF Scenario Analysis Working Group started developing an online climate scenario analysis narrative tool (‘the tool’) to support smaller firms. On Thursday 23 June 2022, the CFRF published a beta version of the tool. The CFRF Scenario Analysis Working Group will continue to collect feedback from users on this beta version of the tool up to 31 October 2022 and will update the tool to enhance content and reflect the latest NGFS scenarios in Q1 2023. The tool generates a summary narrative description of climate-related financial risks and opportunities for the firm based on a set of pre-selected inputs (e.g. business activities models, products, individual financial risks). The narratives draw on data from scenarios developed by the Central Banks and Supervisors Network for Greening the Financial System (NGFS), as at June 2021. The narrative descriptions in this tool do not constitute financial or other professional advice and should not be relied upon as such. A webinar event will be held to mark the launch of the tool. The registration details will be available on this page shortly. 

The PRA and FCA have convened and facilitated CFRF discussions but do not accept liability for the views expressed in the Session 2 guides, which do not necessarily represent the view of the regulators and do not constitute regulatory guidance. The guides are based on current good practice, which will continue to evolve.

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 organisations. The Innovation report provides commentary on actionable innovation opportunities to mobilise financial capital and help steward the economy to net zero.

CFRF membership – Session 3 call for interest

The CFRF met in October 2021 and agreed to refresh up to half of the Forum members to ensure it remains reflective of the industry and brings in new viewpoints and relevant expertise to the collective benefit of the CFRF and the UK financial sector. The Forum will consist of a group of member firms (Forum members) whose representatives are expected to attend all Forum meetings and take part in setting the agenda and strategic direction of the CFRF. Working Group members will be active participants in their selected working groups only.

Becoming a member of CFRF reflects a commitment from an organisation and also implies the will and capacity to actively contribute to the objective and work of the Forum. The CFRF membership aims to achieve a diverse representation of financial institutions including trade associations to ensure the perspective of a broad range of firms is represented. For that reason, UK-regulated banks, insurers, asset managers and asset owners are eligible to apply to join the CFRF.

Accordingly, we are pleased to open the nomination process for becoming a member and we would like to invite you to express your interest. Should your organisation be interested to (re)join the CFRF for Session 3, please complete the nomination form below and return the completed form to the CFRF Secretariat (climate.forum@fca.org.uk) no later than Friday 17 December 2021.

Current membership

Banks  Insurers  Asset managers  Pension funds Other 
Barclays  Aviva  GAM Investments  Railpen  Green Finance Institute 
HSBC  Rothesay  Federated Hermes  Universities Superannuation Scheme  London Stock Exchange Group 
JP Morgan  Lloyd's of London  PIMCO    UK Centre for Greening Finance and Investment 
Natwest  RSA Insurance Group  Schroders     
Coventry Building Society  Phoenix Group Holdings Plc  Royal London Asset Management     
This page was last updated 24 June 2022

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