Money managers and other financial services firms should work with portfolio companies to help improve climate-related disclosures, according to a regulator-backed guide published Monday.
An industry group chaired by the Financial Conduct Authority and Bank of England's supervisory unit, the Prudential Regulation Authority, outlined appropriate ways to embed climate-related financial risks into companies' governance and risk management processes.
The recommendations from the Climate Financial Risk Forum include allocating climate-risk oversight to a chosen senior manager at a company and helping to implement climate-related training for company boards.
The guide also encourages money managers to consider physical and transition risks as well as to determine short-term actions that could be taken to reverse the effects of climate change.
The industry working group, which includes BlackRock, Invesco, Schroders, Standard Life Aberdeen and the international business of Federated Hermes, in addition to some banks and insurance companies, said that effective climate-related financial disclosures can improve the market assessment of the future value of assets.
The guide complements global standards of the Taskforce on Climate-related Financial Disclosures, as well as proposals from both regulators including the PRA's supervisory expectations for banks and insurers regarding climate-change risks and the FCA's proposals to improve climate-risk disclosures by issuers.
"We warmly welcome the hard work of the CFRF members in putting together this ground-breaking guide to help industry navigate these new challenges. By providing practical assistance to help all financial firms develop workable solutions, today marks a significant step forward in building a U.K. financial system resilient to the risks from climate change and supportive of the transition to a net-zero economy," Sarah Breeden, co-chairwoman of the forum and executive sponsor for climate change at the PRA, said in a news release Monday.
"Climate change represents an unprecedented challenge to the planet, and the financial services industry has a significant role to play if we are to meet the UK's target of net zero by 2050," Sheldon Mills, co-chairman of the forum and interim executive director of strategy and competition said in the release. "The guide will be a helpful tool for firms in seeking to address the risks and potential opportunities presented by the transition to net zero."