UK Insurers, Banks Must Be Ready to Manage Climate Risks by End of 2021: BoE

Banks and insurers in Britain must implement by the end of 2021 plans they have drawn up to deal with risks to their businesses from climate change, the Bank of England (BoE) said on Wednesday.

The BoE previously told firms to establish a plan by October 2019 to mitigate climate-related risks, such as rising flood claims, or risks caused by a shift to net-zero emissions that will hit investments in activities with heavy emissions.

But the bank did not previously give a deadline for implementing those plans.

“There are some areas of our expectations where few barriers exist to full implementation, but we recognize that challenges remain in others,” Deputy Governor Sam Woods said in a letter to heads of banks and insurers that it regulates.

“Where challenges exist we will work closely with firms to understand how they are seeking to overcome them,” he wrote, setting the end of 2021 as the date to “fully embed” plans to deal with climate risks.

Limited data meant firms might not be able to calculate in full the impact on capital by the end of 2021, he said.

“However, you should be able to explain what steps your firm has taken to ensure that, where appropriate, capital levels adequately cover the risks to which your firm is, or might be, exposed,” Woods said.

BoE-backed industry guidance on mitigating climate risks was published this week. Woods said the central bank, which also acts as a regulator, would offer further guidance.

Sarah Breeden, the BoE’s executive sponsor for climate change, told an online meeting for bankers that disclosures on climate-related information should soon become mandatory, given the scale of change required.

She said the BoE and other regulators were looking at ways to make such disclosures mandatory, adding: “But you do not need to wait to be forced to disclose. You can choose to act now.”

(Reporting by Huw Jones; editing by Gareth Jones and Edmund Blair)