COVID-19 will not make Climate Change disappear

Climate change remains a critically important issue despite the impact of COVID-19 lockdown bringing about a reduction in carbon emissions.  Despite a 19% fall in global CO2 emissions in May 2020 compared with 2019, reductions for the whole of 2020 are likely to be 6-8%. This level of reduction would be needed each year for the next 30 years to meet the internationally agreed target highlighting there is still much work to be done.

We welcome the report recently released by the Prudential Regulation Authority (PRA)* reaffirming the criticality of climate change in the financial system. It announced its timetable for banks to address this important issue and help to minimise the future risks from climate change. Firms should have fully embedded their approaches by the end of 2021 and be able to demonstrate how they are doing this in line with SS3/19.  Metrics and quantification have been identified as the most challenging aspect of assessing climate-related financial risks.  The report also highlights “firms have significant gaps in their capabilities, data and tools and have not yet integrated scenario analysis into their broader risk assessments. The development of a proportionate and integrated approach to scenario analysis by the end of 2021 will require many firms to increase their capabilities materially in the near-term.”

For further details you can download the report and contact us at D-Risk about how we can help you tackle climate risk assessment.

https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/letter/2020/managing-the-financial-risks-from-climate-change.pdf?la=en&hash=A6B4DD1BE45B2762900F54B2F5BF2F99FA448424

*The Prudential Regulation Authority (PRA) is a part of the Bank of England and responsible for the prudential regulation and supervision of banks, building societies, credit unions, insurers, and major investment firms. It sets standards and supervises financial institutions at the level of the individual firm.