CP10/25: 9 areas firms must address to meet the PRA’s climate expectations

In our previous post on CP10/25, we examined how expectations around climate risk are becoming more specific and embedded. This follow-up focuses on the details, breaking down the proposals in the draft Supervisory Statement and what they mean for firms assessing their current position.

Each area highlighted below reflects the level of depth and integration the PRA now expects from firms managing climate risk.

1. Governance structures and resources

The PRA has highlighted inconsistent application of climate governance across business units. CP10/25 sets out clearer expectations, including defined roles for board committees and a requirement that boards ensure adequate resources and expertise are in place.

Suggested actions:

• Map existing governance structures against the draft expectations.

• Conduct a skills and resource gap analysis at board and executive levels.

• Ensure mandates, reporting lines, and committee terms of reference are clear and reflect climate responsibilities.

2. Board oversight and quality of analysis

Too often, the information presented to boards is too high-level to support effective challenge. The draft statement calls for clearer, decision-useful analysis that links climate risk to financial impacts.

Suggested actions:

• Review the clarity and strategic relevance of current climate board packs.

• Introduce or refine board-level KPIs and KRIs for climate.

• Ensure climate scenarios are linked to financial impacts over relevant time horizons.

3. Board training and expertise

A recurring concern is that many boards lack the technical understanding needed to interrogate climate-related decisions. CP10/25 proposes tailored board training that covers both climate concepts and firm-specific methodologies.

Suggested actions:

• Assess climate literacy at board level.

• Develop or commission targeted training covering transmission channels, scenario analysis, and the firm’s internal methodologies.

• Schedule ongoing updates on climate-related risks and tools.

4. Strategy resilience and risk appetite alignment

The PRA expects boards to oversee how strategic plans hold up under climate scenarios — and how this links with the firm’s risk appetite. That includes understanding where current strategies might be vulnerable.

Suggested actions:

• Integrate CSA outputs into strategic planning cycles.

• Test and evidence the resilience of current strategy to both transition and physical risks.

• Review risk appetite to ensure it is actionable, includes quantitative elements, and is understood across business lines.

5. Climate scenario analysis – rigour and integration

The use of CSA is still developing across the industry. The PRA is asking for deeper, more tailored scenario analysis, integrated into capital and risk planning — with wider adoption of reverse stress testing.

Suggested actions:

• Enhance CSA methodologies and modelling capabilities.

• Formalise how CSA outputs feed into ICAAP, ILAAP, and strategy.

• Tailor scenarios to reflect specific portfolios, markets, and geographies.

• Introduce reverse stress tests into the CSA framework.

6. Risk management framework integration

Climate risk should sit within existing risk frameworks, not alongside them. The PRA expects clearer internal reporting and defined metrics to support decision-making.

Suggested actions:

• Update risk policies, procedures, and controls to include climate-specific elements.

• Define and cascade quantitative metrics for material climate risks.

• Improve internal climate reporting to ensure it supports decision-making.

• Evaluate physical and transition risks across operational resilience, including supply chains and third-party dependencies.

7. Banking specifics: Financial reporting, capital and liquidity

The bar is being raised for how climate is handled in ECL, ICAAP and ILAAP. The PRA expects stronger evidence that climate factors are being considered — and clearer links between scenarios and capital decisions.

Suggested actions (for banks and lenders):

• Strengthen governance and controls around climate-related financial reporting.

• Refine methodologies for climate-adjusted ECL calculations, including PMAs.

• Document how CSA outputs influence ICAAP and ILAAP assessments.

• Ensure consistency across credit, market risk, and capital planning frameworks.

8. Data strategy and management

Data remains a major challenge. CP10/25 calls for more structured approaches to sourcing, validating and governing the data used to support climate risk management — especially third-party sources.

Suggested actions:

• Build a climate-specific data strategy covering risk, reporting, and disclosures.

• Invest in sourcing and validating key datasets (e.g. emissions, physical risk scores, transition plans).

• Implement quality controls and explore advanced analytics to support proxy use.

• Define governance for third-party data, including procurement and oversight processes.

9. Disclosures – aligning with evolving standards

Although CP10/25 doesn’t introduce new disclosure requirements, the PRA is encouraging firms to prepare for alignment with UK SRS and the ISSB baseline. Building the capabilities for this now will ease the transition later.

Suggested actions:

• Prepare for future reporting under UK SRS, which will likely align with ISSB standards.

• Enhance voluntary disclosures to bridge to upcoming mandatory requirements.

• Strengthen internal data capture and process documentation to support assurance and reporting.

Final thoughts

Addressing these nine areas with focus and clarity will help firms meet regulatory expectations, build internal resilience, and create a stronger foundation for managing climate-related risks with confidence.