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.
Session 3 roundtable discussion – Friday 29 July 2022
On Friday 29 July 2022, the Climate Financial Risk Forum (CFRF) convened a roundtable discussion to consider the implications of the current geopolitical and economic environment on the transition to net zero at the time. Attendees at the session were drawn from a broad selection of financial firms. It was structured around two key topics:
Part 1 - Implications of the current geopolitical and economic environment on the transition to net zero carbon emissions at the time; and
Part 2 - How can the financial services industry respond to these challenges?
Session 3 guides
The CFRF’s third round of guides and other materials, were published in two tranches, in December 2022 and March 2023. Written by industry, for industry, the materials build on the CFRF’s previous publications, and aims to continue to support the financial sector in developing its approach to addressing climate-related financial risks and opportunities.
The guides focus on three areas: (1) the transition to net zero; (2) scenario analysis; and (3) climate disclosure, data and metrics. This reflects the focus of the CFRF in Session 3, continuing the forum’s work on scenario analysis and climate disclosure, data and metrics, and introducing a new CFRF working group to focus on the transition to net zero. Links to the materials are set out below. Further Session 3 outputs are due to be released in the first quarter of 2023.
The PRA and FCA have convened and facilitated CFRF discussions but do not accept liability for the views expressed in the Session 3 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.
Session 4 guides
In October 2024, the CFRF published three new guides and supporting documents to help firms build capabilities in the area of nature, short-term scenario analysis and adaptation.
Nature-related Risk: Handbook for Financial Institutions
- Aim of publication: Provides an introduction for financial institutions to help frame nature as a risk, and discusses emerging practices in incorporating nature into financial risk management.
- Industry need: Increasing industry discussion and interest in nature-related risk.
- Supporting documents:
Short-term Scenarios
- Aim of publication: To discuss the various use cases of short-term scenarios for banks/asset managers/insurers to provide more guidance to firms.
- Industry need: Growing interest in and use of short-term scenarios.
- Supporting documents:
Mobilising Adaptation Finance to Build Resilience
- Aim of publication: Provide guidance for the industry to assess physical risks they face and to facilitate increased levels of investment into climate adaptation to respond to those risks as an opportunity.
- Industry need: Challenges in understanding and pricing physical climate-related risks.
- Supporting documents:
The PRA and FCA have convened and facilitated CFRF discussions but do not accept liability for the views expressed in the Session 3 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.
