A letter from the Prudential Regulation Authority’s (PRA) has asked CEOs to consider priorities for international banks in 2022, with the financial risks arising from climate change prominent amongst these.

The letter notes that, “progress has not been consistent across all firms” and observes that “most firms are focused on the business opportunities presented by climate change, and [we] remind firms that climate change also presents an increasing business risk that is foreseeable and requires action now”.

The PRA will now expect firms to take a forward-looking, strategic and ambitious approach to managing climate-related financial risks and will incorporate supervision of climate-related financial risks into its core supervisory approach.

The PRA will pay particular attention to how firms quantify climate-related risks and incorporate those risks into business strategies, decision-making, and risk-taking.

It also warns that it will keep a range of supervisory tools under review for use where it deems progress to be insufficient.

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