Many of the world’s leading banks and insurers are busy finalizing their response plans to the Bank of England’s innocuous-sounding supervisory statement number SS3/19. It sets out the regulator’s expectations for how banks and insurers should manage the financial risks of climate change, including modification of governance and risk management frameworks, development of scenario analyses and stress testing, and disclosure of climate-related risks, according to Rob Bailey, Dir. of Climate Resilience at Marsh & McLennan Insights.
The Bank of England’s initiative has implications that reach far beyond the United Kingdom. A growing number of regulators around the world are examining similar measures. The Network for Greening the Financial System — a club of central banks and supervisors focused on integrating climate change into regulatory frameworks — currently has 42 members from five continents. A similar club of insurance regulators, the Sustainable Insurance Forum, has 24 members. A third initiative focused on countries with growing social and economic statuses — the Sustainable Banking Network — has 27 banking regulators among its members.