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Climate-related risk – five years on, SS 3/19 is looking a little tired

What might the regulatory expectations for banks and insurers look like from 2025?

Alex Hindson, Risk Consulting Partner and Head of Sustainability
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The UK was the first to move in 2019 on setting regulatory expectations for banks and insurance companies with respect to climate-related financial risk management. Five years on, these requirements are not looking quite as demanding, compared to more recent developments in a number of major global financial centres. The regulator has signalled they will revisit their expectations during 2024. So, what might be in store?

Each year, the Prudential Regulation Authority (PRA) set out their plans and priorities for the year ahead in terms of regulatory developments for banks and insurance companies, in the form of a ‘Dear CEO letter’ and in 2024, their views on climate-related financial risks were as follows.

  • They would assess how well firms are implementing Supervisory Statement 3/19 (SS 3/19) as it relates to enhancing banks’ and insurers’ approaches to managing the financial risks from climate change.
  • They would start on their plans to update SS 3/19 including to “identify effective practice and developments in wider regulatory thinking”.

Where is the financial services market currently?

In our discussions with financial services companies, our general observation is that most moved on some time ago from implementing their climate risk management programme. This is partly due to other more pressing regulatory pressures such as Operational Resilience, and also because the current requirements of SS 3/19 are less demanding than more recently introduced international standards or, in the case of listed or large insurers (with over 500 employees), the requirement to report publicly against the Taskforce for Climate-related Financial Disclosures (TCFD) guidance.

There is a subset of organisations where the initial efforts undertaken to ensure compliance have failed to take root and the fruit has died on the vine, in terms of embedding these changes in business-as-usual activity. This manifests itself as four key areas.


Symptom: board and management committees have responsibilities for overseeing climate risk management, but this is done as a cursory manner, with limited evidence of discussion and challenge. Those with Senior Manager regulatory responsibility for climate change have little day-to-day involvement and are not clear on their sponsorship responsibilities in practice.


Symptom: documented statements outline how climate change is taken into consideration in strategy setting and is recognised as a principal risk, but in practice little has changed. Climate factors may be factored into the operation of facilities and investment portfolio management but have yet to have a material effect on underwriting decision making or product innovation.

Risk management

Symptom: many organisations have succeeded in integrating climate change into their enterprise risk management frameworks, establishing risk and control assessments. Fewer have effectively adopted risk appetites and tolerances that enable them to track exposure and steer their underwriting portfolios.

Metrics and scenarios

Symptom: relatively generic climate scenarios have been used, which are either not well integrated into the organisation’s exposure management processes or pause limited challenge to the business model on a short to medium horizon.

Where this has been perceived as a compliance exercise, frameworks have been implemented on paper but are not being owned and used.

How does SS 3/19 compare to international regulatory standards?

In 2019, the Supervisory Statement and associated Policy Statement PS 11/19 were market-leading in their breadth and depth of expectations. Despite the practical implementation of these requirements being delayed into 2021 by the COVID-19 pandemic, this still represented leading practice at the time. However, now stood in mid-2024, that is no longer the case and number of other key financial services regulators have progressed beyond this baseline.

By comparing the PRA expectations to developments in other markets including the European Union, Canada, Australia, Switzerland, Bermuda and Singapore; as well as emerging good practice as described the PRA’s ‘Dear CEO’ letter, we have been able to reach certain conclusions.

More recent regulatory standards have included requirements for:

  • formalised transition plans to deliver on decarbonisation
  • explicit consideration of emissions associated with insurance underwriting
  • consideration of the materiality of a wider range of sustainability exposures
  • engagement with clients to influence the real economy
  • enhanced public disclosures.

What are our predictions for what the PRA’s enhancements to SS 3/19 might be?

Here are our top five expectations of what ’SS 3/25’ might look like, should the PRA revisit its expectations in the coming year.

1. Net Zero commitments and transition plans to deliver.

Transition plans provide a clear articulation of how net zero commitments will be delivered in practice, outlining committed action plans and progress to date. The UK Treasury sponsored the development by the Transition Plan Taskforce (TPT) of a best practice framework which is expected to be adopted by the Financial Conduct Authority for listed companies. Swiss law already requires insurance companies to report on their transition plans and the European Corporate Sustainability Reporting Directive (CSRD) regulations have set an expectation that transition plans are disclosed.

We therefore predict that any revision to SS 3/19, will explicitly include a requirement for a formal transition plan and its public disclosure.

2. Financed emissions.

Scope 3 greenhouse emissions, associated with insurer’s underwriting and investment portfolios will typically represent 90% of their total emissions. The Partnership for Carbon Accounting Financials (PCAF) published guidance on how these emissions could be estimated in 2022. The International Sustainability Standards Board (ISSB) standards which are being adopted from 2024, include an expectation that these Scope 3 emissions are disclosed. These requirements have been adopted into Australian local regulations and similar regulatory expectation set by Canadian regulators.

We therefore predict that any revision to SS 3/19 will explicitly include a requirement to disclose Scope 3 emissions associated with investments and underwriting.

3.Enhanced disclosure.

Many of the previous predictions involve additional activities to demonstrate that climate risk management is being embedding into organisations’ strategies and plans. This will culminate in additional private and public regulatory disclosures. The Bermuda Monetary Authority published a discussion paper exploring the potential for climate-related disclosures to be incorporated into insurers’ publicly reporting, such as the Financial Condition Report, irrespective of size. European Union CSRD disclosures are significantly more demanding on climate change and biodiversity than current UK regulatory requirements and will be subject to limited assurance by external auditors as part of financial reporting.

We therefore predict that any revision to SS 3/19 will require mandatory climate risk reporting by insurers and banks irrespective of size or other listing or legal requirements.

4. Materiality assessments.

Materiality assessment help define which aspects of sustainability matter most to an organisation and its stakeholders. They have now been mandated by the EU CSRD regulations, as well as Irish and Bermudian insurance climate regulations.

We therefore predict that any revision to SS 3/19 will require a materiality assessment to be completed most likely limited to a climate risk scope.

5. Visible engagement with clients.

In its sector guidance, the TPT set expectations that insurers disclose the level of engagement with clients on transition plans and net zero target setting. This mirrors the Stewardship Code requirements established for asset managers in engaging with their investees. Regulators are increasingly interested in how insurers and banks are partnering with their clients to ensure transition plans are aligned.

We therefore predict that any revision to SS 3/19 will require disclosure of the outreach and engagement strategies adopted to work with clients to deliver transition plans.

Our overall conclusion, ‘fix the roof while the sun is shining’. A number of organisations have let their climate risk management efforts slip, because of other priorities. The regulators have not forgotten this topic and especially after the new International Sustainability Standards Board (ISSB) requirements are incorporated into the Listing Rules by the Financial Conduct Authority, scrutiny will undoubtedly increase again. The time to act is now.

It is important to maintain horizon scanning for regulatory developments and spot emerging developments early, for firms to retain control of their climate risk and sustainability programmes. Ultimately this has implications for how sustainability is embedded into decision making whilst being supported with more robust data and reporting processes.

Through our practical and experienced team, Crowe continues to support our clients in setting their own agenda to address rapidly changing sustainability and climate-related reporting requirements. Please get in touch with Alex Hindson or your usual Crowe contact for more information.

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Alex Hindson
Alex Hindson
Partner, Head of Sustainability