We respond to the Department for Environment, Food and Rural Affairs’ (DEFRA) invitation to report on climate change adaptation challenges faced by financial services firms.
About our response
We have produced this report based on informal engagement with firms and our understanding of market dynamics. It is not a comprehensive assessment and is not intended to set out regulatory expectations for firms.
We believe there are 3 major issues affecting climate change adaptation in the financial services industry:
- Data and modelling to help financial services quantify and manage climate risks.
- Barriers and enablers to insurance underwriting for climate risks and in consequence lending and investment.
- Barriers and enablers to financial services in allocating capital to adaptation.
Focus of the report
This report focuses on:
- Risk management adjustments that financial services firms need to make due to climate change.
- The importance of financial products in enabling and supporting adaptation and transition in the wider economy.
These 2 areas are closely linked because a good understanding of climate risk is needed for both.