UK banks and insurers have just over six months to deliver on their Bank of England biennial exploratory scenario (BES) commitments. However most board members and senior managers have not built their careers on a deep understanding of climate change. James Belmont, Partner and Head of Climate Risk at Baringa Partners, looks at how to address this.
Question: What training do board members and senior managers need to enable them to effectively engage with regulators, customers, employees, investors, and wider society on climate risk?
Answer: Many of our clients are looking for deeper understanding of climate risk and its implications for their business. Not sure where to start? Baringa’s team of financial services, energy, and transition experts can help you develop and run senior leadership training sessions to answer these questions, identify gaps, and get your team up to speed on issues including:
- Regulatory expectations. What is the regulator looking for in a good climate risk capability plan? How quickly do you need to develop these capabilities? How much detail should you expect the regulators to include in any prescribed regulatory climate risk scenarios?
- Definition of good of climate risk management capabilities. In which risk types and portfolio segments should you implement specific climate-related limits? What management information should you build to help monitor emerging climate related risks?
- Scenario analysis. What does an overall framework for climate change scenario analysis include? How do you translate climate challenges such as greenhouse gas emissions pathways into meaningful impacts on your portfolio? How do you choose between the emerging physical risk product vendors?
- Climate risk in the context of your business model. How does transition risk manifest in your different business lines (e.g. in a mortgage portfolio vs a portfolio of corporate loans, bonds or equities)? Are you expected to consider physical risks just to your balance sheet exposure, or also to your own operations and supply chain? And what about to the supply chains of your borrowers?
- Disclosure. What does good look like? How do your current disclosures compare with those of your peers? What quantitative content will you need in your disclosures in the next couple of years? Will you need to publish the results of climate scenarios?
Baringa Partners is an independent business and technology consultancy. We help businesses run more effectively, navigate industry shifts and reach new markets. We use our industry insights, ideas and pragmatism to help each client improve their business. Collaboration is central to our strategy and culture ensuring we attract the brightest and the best. And it's why clients love working with us. Contact us to learn more and catch Baringa at RiskMinds International, the leading risk management event, 7 - 11 December 2020.