CP10/25 signals a shift
Climate risk is now everyone’s business
The Prudential Regulation Authority (PRA) has positioned its recent consultation paper CP10/25 as a regulatory reset. Climate risk is now firmly recognised as a financial risk that must be embedded across governance, risk, finance and operations. It cannot remain siloed within a sustainability function. Meeting the expectations set out in CP10/25 requires a coordinated, organisation wide response.
This response must align with the organisation’s broader strategic direction and address fundamental questions about identity, ambition and long-term positioning. Climate considerations should be woven into strategic planning, market positioning and long-term value creation, making resilience a core part of how the organisation defines itself and prepares for the future.
Reframing Climate Risk: Who in your firm is responsible?
Just before the Paris Agreement in 2015, Henri de Castries, then CEO and Chairman of AXA, issued a stark warning: “A 2°C world might be insurable, a 4°C world certainly would not be insurable.” This sentiment has since been echoed by industry leaders such as Günther Thallinger of Allianz SE, who cautioned that “Entire asset classes are degrading in real time, which translates to loss of value, business interruption and market devaluation on a systemic level.”
CP10/25 reframes climate risk as a material financial risk and a strategic priority. It is not just the responsibility for the sustainability function. It requires collaboration across all business units.
This shift requires a rethink of the operating model. As outlined in Crowe’s article on sustainability operating model, firms are now starting to move from a centralised sustainability team to a distributed ‘hub-and-spoke’ approach. In this model, the sustainability function guides and coordinates, while core functions take responsibility for execution.
Crowe’s Sustainability Operating Model survey, now in its third year, shows gradual market changes as outlined in our embedding sustainability article. Risk and investment functions are leading the way in integration, while progress in underwriting, operations and procurement is steadily evolving. The smaller central sustainability function at the ‘hub’ is typically now focused on setting strategy, monitoring external developments, coordinating efforts and communicating with key stakeholders. CP 10/25 raises expectations further, requiring both board and executive accountability but also strong distributed responsibility within each functional area.
However, many organisations still focus their sustainability efforts at the senior leadership level, with broader implementation lagging. CP10/25 makes it clear: climate risk must be embedded across teams, with functional accountability, not just awareness.
Functions that should support implementation
To meet the expectations of CP10/25 a cross-functional approach is essential.
Responsible for ensuring climate-related risks are integrated into business strategy and risk appetite.
It should define responsibilities, challenge management assumptions, and ensure board members have a sufficient understanding of climate risks.
The board needs to oversee monitoring and reporting mechanisms and ensure disclosures align with regulatory expectations, particularly those outlined in CP10/25. This includes embedding climate risk into strategic planning and ensuring it is reflected in the firm’s governance and decision-making processes.
Responsible for leading the integration of climate risks into the risk management framework and for articulating a clear and implementable climate risk appetite.
Risk and actuarial teams must move beyond standard scenario analysis to develop tailored stress tests, quantify tail risks and integrate climate metrics into capital models.
While Network for Greening the Financial System (NGFS) scenarios provide a useful foundation, they are not sufficient on their own. Climate risk must be embedded in the broader risk appetite framework. This includes defining clear climate-related risk tolerances, setting limits on exposures to vulnerable sectors or geographies, and ensuring these thresholds are reflected in capital planning, underwriting and investment decisions.
Risk registers and taxonomies should be updated to capture emerging climate risks and climate considerations must be integrated into the ORSA processes. Climate risk should not be treated as a standalone category but as a cross-cutting driver of financial and operational risk.
Responsible for embedding climate scenario analysis into financial planning, capital management and risk quantification.
The finance function plays a central role in implementing CP10/25 by translating climate scenarios into tangible financial impacts. What gets measured and reported, ultimately gets done. This includes assessing how climate-related risks, both physical and transitional, affect credit, market, and underwriting exposures, and reflecting these in asset valuations, liability projections and solvency assessments, ensuring that forecasts are forward-looking and resilient.
CP10/25 signals that climate risk may influence regulatory capital requirements. Finance is at the heart of aligning capital strategies with emerging prudential expectations, making it an active contributor to this analysis. In this context, finance is not a passive recipient of risk insights but a strategic partner in shaping resilient, forward-looking, data-driven. Finance is a key stakeholder in ensuring that business model viability is understood and carefully managed.
Responsible for translating climate scenario analysis into risk selection, pricing strategies and portfolio management.
Underwriting plays a frontline role in managing climate-related financial risks by incorporating forward-looking climate insights into decision-making. As physical and transition risks evolve, underwriters must evaluate how different climate scenarios could affect the frequency, severity and geographic distribution of insured events. To do this effectively, they need support from technical experts in exposure management, as well as actuarial and claims teams, to build a clearer picture of future risk. Moving beyond historical loss data is essential and underwriting must incorporate scenario analysis to inform guidelines, shape risk appetite and optimise portfolio composition.
CP10/25 reinforces the need for underwriters to engage with climate data, understand exposure concentrations, and contribute to the development of bespoke models that reflect the firm’s specific risk profile. By taking these steps, underwriting becomes a strategic function in managing climate-related financial risks, ensuring that products remain viable, risks are appropriately priced and the firm’s overall exposure aligns with its strategic and regulatory objectives.
Responsible for translating climate scenario planning into practical resilience and business continuity strategies.
Operations play a critical role in translating climate scenario planning into practical strategies for resilience and business continuity strategies, as outlined in CP10/25.
As climate related disruptions increasingly affect supply chains, infrastructure and service delivery, operational teams must ensure that scenario insights directly inform contingency planning, resource decisions and critical process design. This includes embedding climate considerations into outsourcing arrangements, facilities management and disaster recovery protocols.
CP10/25 also highlights the importance of showing how scenario analysis informs real-world decisions. This places operational teams at the heart of turning strategic climate insights into meaningful action. Far from being a back-office function, operations are a key enabler of climate risk preparedness and organisational adaptability.
Responsible for bridging climate science and business strategy and coordinating cross-functional climate risk integration.
The sustainability function is central to delivering a joined-up, organisation-wide response to CP10/25. Its role goes far beyond reporting and disclosure. It helps the organisation interpret complex climate data, regulatory developments and scientific insights, and turns them into practical guidance for decision making.
Sustainability teams support scenario analysis by ensuring that assumptions are based on credible science and aligned with emerging policy. They also help coordinate efforts across departments, promoting consistency in climate-related metrics, methodologies and disclosures.
Under CP10/25, sustainability acts as a strategic partner, working closely with risk, finance, underwriting and operations to ensure the organisation responds to climate risks in a consist and aligned way.
Strengthening organisational agility to tackle climate risk
CP10/25 is more than a regulatory update. It marks a shift in how organisations must approach climate risk. With 133 clauses, the PRA has moved from broad principles to detailed expectations, requiring organisations to show how climate risk is embedded in decision making, capital planning and governance.
Meeting these expectations calls for more than compliance. It requires a fresh look at how sustainability and operations work together to build resilience. The sustainability function must evolve into a strategic partner, translating complex climate data and policy into practical business insight. Operations must take a leading role in ensuring scenario planning drives contingency planning and critical processes.
Existing structures may no longer be fit for purpose. Now is the time to refresh operating models, clarify roles and responsibilities and strengthen departmental collaboration. Organisations that act early will be better placed to meet regulatory demands and build long-term resilience.
Crowe continues to support clients in navigating this shift, helping them take control of their sustainability and climate agenda with confidence. If you’re ready to take the next step, contact us to explore how we can support your organisation in navigating CP10/25 and building a more agile, climate ready organisation.
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