In the preparation and follow-up of the UN Climate Conference in Glasgow (COP26) in 2021, the Prudential Regulation Authority (“PRA”) and the Bank of England (BoE) together with Parliament have sparked initiatives, new expectations and have introduced new regulations to assess the impact of climate (change related) risk on the financial industry and wider society.
Since then, organisations have been working on obtaining appropriate long- and short-term estimates on the impact of climate risk1 both in extreme events (through stress testing, scenario analysis and capital assessments), and expected impacted (provisioning). Moreover, the introduction of obligatory transition plans and voluntary commitments have triggered a need to obtain robust estimates of a portfolio carbon footprint as well as a strategy how to reshape the portfolio such that commitments can be met.
