• Climate Risk

    Climate Risk

    We help you identify and manage climate-related risks in a way that is proportionate, practical, and embedded. Our support focuses on integrating physical and transition risks into your governance, ICAAP, ILAAP, and stress testing frameworks -supporting better decision-making and alignment with regulatory expectations.

Key activities

Managing climate risk effectively requires more than policy statements or ESG scoring. The Prudential Regulation Authority (PRA) expects banks to take a structured approach, considering the materiality of climate risk and its impact on capital and liquidity. This includes:

  • Assessing exposure to physical risks (e.g. extreme weather, flooding, heat stress)

  • Evaluating transition risks (e.g. policy shifts, carbon pricing, stranded assets)

  • Incorporating climate considerations into business strategy, credit risk assessments, and stress testing

  • Defining governance structures and assigning responsibility at board and senior management levels

  • Establishing internal capabilities to understand and manage evolving climate-related risks

We support banks in addressing these expectations in a proportionate, practical, and embedded way.

  • We help you assess the relevance and potential materiality of climate risk in the context of your business model, geography, and customer base. This forms the foundation for defining proportionate responses across your risk framework.

  • We support the integration of climate risk considerations into capital and liquidity planning. This includes identifying relevant risk drivers, evaluating potential capital implications, and developing documentation aligned with supervisory expectations.

  • We assist in identifying or building relevant climate-related stress scenarios—whether focused on physical risk (e.g. property lending exposure to flood-prone areas) or transition risk (e.g. shifts in carbon pricing or sectoral policy). These are used to assess impact on earnings, capital, and liquidity.

  • We help define and document responsibilities for climate risk across your governance structure, including board engagement, risk appetite, and reporting lines.

  • We assist in preparing internal and external reporting on climate risk, drawing on TCFD-aligned principles and PRA expectations, and ensuring consistency with your wider risk management practices.

What we offer

  • Proportionate integration of climate risk

    Proportionate integration of climate risk

    We tailor our approach to reflect the size and complexity of your bank, focusing on meaningful integration of climate risk into core governance, Risk Management Framework, ICAAP, and ILAAP processes.

  • Policy and documentation review

    Policy and documentation review

    We review or help draft relevant policies, risk appetite statements, and governance documentation that reflect climate risk considerations.

  • Stress testing and capital impact evaluation

    Stress testing and capital impact evaluation

    We incorporate climate-related drivers into your stress testing framework and support you in understanding how climate risk may affect capital and liquidity buffers.

Let’s get started

Interested in learning more about how we can support your bank? Whether you have specific requirements or just want to explore our services further, we’re here to help. Please feel free to contact us, and one of our experts will get in touch to discuss your needs and how we can assist

We look forward to working with you!

Why choose us

  • We understand the challenges small- and medium-sized banks face when responding to climate risk. Our solutions are pragmatic, proportionate, and designed to work within your existing risk infrastructure.

  • We stay closely aligned with PRA guidance on climate-related financial risks and help you prepare for supervisory reviews, policy changes, and evolving industry standards.

  • We embed climate risk considerations into your existing frameworks—so you build on what you already have, rather than create parallel processes.

  • We provide well-structured documentation that supports internal approval, board engagement, and supervisory review. Our behavioural modelling records are ready for scrutiny.

  • We help you link climate risk insights with broader business and risk strategy—improving both your regulatory position and long-term decision-making.

What are we talking about

Climate Risk
Regulatory updates, Climate Risk, Stress testing, ICAAP
CP10/25: Evolving Climate Risk Expectations for UK Banks
Regulatory updates, Climate Risk, Stress testing, ICAAP

In April, the PRA published Consultation Paper 10/25 proposing updates to its supervisory expectations on climate-related financial risks (CRFR). This marks a step-change from SS3/19, enhancing requirements in areas such as governance, risk management, scenario analysis, data, and disclosure.

For small and medium-sized UK banks, these proposals are not only about compliance, but also a chance to embed climate resilience in business strategy, protect value, and build long-term competitive strength.

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Regulatory updates, Climate Risk, Stress testing, ICAAP
Liquidity Risk, Risk management, ILAAP, Stress testing
How Severe Should a Liquidity Stress Test Be?
Liquidity Risk, Risk management, ILAAP, Stress testing

Liquidity stress testing remains a cornerstone of effective risk management and regulatory compliance for banks. However, a persistent challenge lies in interpreting what constitutes a “severe but plausible” stress scenario, particularly in the context of evolving depositor behaviours and increasing digitalisation of banking.

This paper aims to address this challenge by examining how stress scenarios can be robustly calibrated using empirical evidence backed by statistical methods, with particular focus on liquidity stress testing informing the Internal Liquidity Adequacy Assessment Process (ILAAP).

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Liquidity Risk, Risk management, ILAAP, Stress testing
Stress testing, Regulatory updates, Risk management, ILAAP, ICAAP
The 2025 ICAAP Scenarios — Stress Testing for Small- and Medium-sized Banks
Stress testing, Regulatory updates, Risk management, ILAAP, ICAAP

Arriving hot on the heels of our earlier article on what the 2025 Bank Capital Test Means for small- and medium-sized banks, the Prudential Regulation Authority (PRA) has quietly published an accompanying set of stress parameters. These include both rates-up (supply shock) and rates-down (demand shock) scenarios, and can serve as a useful benchmark for firms not participating in concurrent stress testing. They may be particularly helpful for use in internal stress testing exercises, including within the Internal Capital Adequacy Assessment Process (ICAAP).

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Stress testing, Regulatory updates, Risk management, ILAAP, ICAAP
Stress testing, Regulatory updates, ICAAP, Risk management, ILAAP
Stress Signals: What the 2025 Capital Test Means for Small- and Medium-sized Banks
Stress testing, Regulatory updates, ICAAP, Risk management, ILAAP

With the Bank of England’s 2025 Bank Capital Stress Test now in motion, small and medium-sized banks should take note. While only the large banks participate directly, it is nonetheless of interest for other firms as they approach their next stress testing exercise. The latest publications bring stress parameters up to date from the 2024 Desk-based Stress Test, and some elements have changed. This article explores what banks can take away from the latest stress programme and how to reflect those developments in their own risk management processes.

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Stress testing, Regulatory updates, ICAAP, Risk management, ILAAP
Stress testing, ICAAP, ILAAP, Risk management
PRA’s 2024 ICAAP Stress Test Scenarios for Non-Systemic Banks
Stress testing, ICAAP, ILAAP, Risk management

On 27th June 2024, the Prudential Regulation Authority (“PRA”) published the ICAAP Scenarios for non-systemic UK banks, which are the supply shock scenario and the demand shock scenario. This article summarises the key factors of the scenarios and provides specific points on how small- and medium-sized banks should approach there stress testing design processes, with relation to the 2024 ICAAP Scenarios.

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Stress testing, ICAAP, ILAAP, Risk management
Stress testing
Stress testing overview
Stress testing

Stress testing will assist banks to ask the right question about its business model, capital adequacy, liquidity adequacy and franchise viability. This enables board and management teams to gain a forward looking view of its business and identify suitable management actions in a severe and plausible stress event.

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Stress testing