Transition in thinking: The impact of climate change on the UK banking sector
This report examines the financial risks from climate change that impact UK banks, building societies and Bank of England Prudential Regulation Authority-designated investment firms. It assesses how banks are responding to these, and clarifies the PRA’s supervisory approach.
Financial risks from climate change arise from two primary channels or ‘risk factors’: physical and transition. Physical risks can arise from climate and weather-related events, such as heatwaves, droughts, floods, storms and sea level rise. They can potentially result in large financial losses, impairing asset values and the creditworthiness of borrowers.