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November 15, 2018

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FCA Publishes Discussion Paper and PRA Consults on Climate Change and Green Finance

On October 15, the UK Financial Conduct Authority (FCA) published a discussion paper (Discussion Paper) on climate change and green finance. On the same day, the UK Prudential Regulation Authority (PRA) published a consultation paper (Consultation Paper) on a draft supervisory statement (Draft Supervisory Statement) on enhancing the approach of banks and insurers to managing the financial risks from climate change.

In its Discussion Paper, the FCA sets out:

  1. how the different impacts of climate change could impact the FCA’s long and short-term objectives;

  2. some of the opportunities and risks the transition to a low-carbon economy presents to the United Kingdom’s financial services markets; and

  3. specific actions the FCA will take in the near-term to ensure that markets function well and deliver good outcomes for consumers, such as enabling competition and market growth for green finance.

In its Draft Supervisory Statement, the PRA sets out its proposed expectations regarding how firms:

  1. embed their consideration of the financial risks from climate change in their governance arrangements;

  2. incorporate the financial risks from climate change into their existing risk management practice;

  3. use (long-term) scenario analysis to inform strategy setting, risk assessment and identification; and

  4. develop an approach to disclose the financial risks from climate change.

The FCA and PRA issued press releases welcoming each other’s respective Discussion Paper and Consultation Paper. They also noted that they are establishing a climate financial risk forum to coordinate action, share best practices, help the financial sector manage the financial risks from climate change and support innovation for financial products and services in green finance. The forum will involve industry representatives, technical experts and other stakeholders. Membership is expected to be finalized by the end of November, having a first meeting in early 2019.

The deadline for responses to the Consultation Paper is January 15, 2019 and the deadline for responses to the Discussion Paper is January 31, 2019.

The FCA’s Discussion Paper is available here and the PRA’s Consultation Paper is available here.

The FCA’s and PRA’s press releases are available here and here, respectively.

©2018 Katten Muchin Rosenman LLP

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John Ahern, Financial Attorney, London, Katten Law Firm
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John Ahern, partner at Katten Muchin Rosenman UK LLP and head of the London Financial Services group, focuses his practice on banking, financial services, UK and European financial markets, and related regulations. His background in private practice and as in-house counsel at a global investment bank provides him with perspective on the unique regulatory issues facing the wholesale and private banking sectors. John advises multilateral trading facilities, broker-dealers and banks on trading, clearing and settlement as well as custody of securities—both physical and...

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Carolyn H. Jackson, International Attorney, Katten Muchin law firm
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Carolyn Jackson is a partner in Katten Muchin Rosenman UK LLP and is a Registered Foreign Lawyer. She provides US financial regulatory legal advice to a broad range of market participants, including commercial banks, investment banks, investment managers, broker-dealers, electronic trading platforms, clearinghouses, trade associations and over-the-counter derivatives service providers.

Carolyn guides clients in the structuring and offering of complex securities, commodities and derivatives transactions and in complying with US securities and commodities laws and regulations. 

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Nathaniel Lalone, Katten Muchin Law Firm, Financial Institutions Attorney
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Nathaniel Lalone, a partner at Katten Muchin Rosenman UK LLP, has a broad range of experience in the regulation of financial products and financial markets, and frequently provides regulatory and compliance advice to trading venues, clearing houses and buy-side firms active in the over-the-counter (OTC) derivatives, futures and securities markets. He is actively involved in advising clients on the implementation of MiFID 2 and MiFIR in the European Union as well as the international reach of US financial services regulation. He also has significant experience with structuring...

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Neil Robson, private equity fund managers counselor, Katten Law Firm, London
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Neil Robson, a regulatory and compliance partner with Katten Muchin Rosenman LLP, focuses his practice on counseling hedge and private equity fund managers and other investment advisers on operational, regulatory and compliance issues. He regularly addresses Financial Conduct Authority (FCA) and EU authorization and compliance under both the EU Alternative Investment Fund Managers Directive (AIFM Directive) and MiFID, cross-border issues in the financial services sector, market abuse, anti-money laundering and regulatory capital requirements, formations and buyouts of...

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