A group of 21 investors have written to the Bank of England’s Prudential Regulation Authority to seek its support in ensuring that banks disclose climate risks.

Writing to the Bank of England Deputy Governors Sam Woods and Sarah Breeden, the letter has raised concerns about the lack of climate risk disclosures in banks and a lack of transparency about climate change risks brought to investors.

The letter raised concerns about the lack of information on capital adequacy in the event of severe climate risks, as well as how not sharing the risks of climate change undermines the principal of market discipline as foreseen under Pillar 3 of the Basel Framework that requires them to make basic disclosures.

The investors believe that their proposals are not just important to support financial stability but are also ‘consistent with existing rules around capital adequacy and financial reporting in the UK’.

The group of investors, including Sarasin & Partners, AP Pension and Jupiter Asset Management, have proposed a list of actions including explicit guidance to banks on severe but possible climate scenarios as well as requirements for banks to disclose key conclusions from regulatory climate stress-testing exercises they have carried out. They have also proposed that material climate risks are also properly reflected in banks’ financial statements and auditor reports.

The letter acknowledged the Bank of England’s positive ‘leadership in promoting climate resilience’ but called on further action to be taken. They concluded that: “We believe that the actions outlined above would equip investors to enhance system-wide resilience by enabling more effective market discipline.”

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