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Law, policy and regulation is evolving to manage climate change risk. This typically takes place in a national framework, although international networks promote knowledge-sharing and best practice.
The UK鈥檚 became law over ten years ago. In June 2019 the UK passed net zero legislation committing the UK to a legally binding target of emissions by 2050.
The UK鈥檚 is an independent statutory body established under the Climate Change Act 2008. Its purpose is to advise the UK on emissions targets and to report to parliament on progress made in reducing greenhouse gas emissions and preparing for, and adapting to, the impacts of climate change.
France also has significant climate legislation, which extends into the financial sector. The French Sustainable Investment Forum (FIR,) has produced an . In New Zealand the sets out how a country highly dependent on agriculture is tackling climate change. National legislation reflects local circumstances. Whereas a lot of the focus in the UK has been on decarbonising energy, the agricultural sector is a prime focus for New Zealand.
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Government support extends to education. is a commitment from chartered and professional bodies (including the IFoA) to integrate green finance and sustainability into their core curricula, new qualifications, and the continued professional development of their members.
The Network of Central Banks and Supervisors for Greening the Financial System () brings together a growing number of national central banks and financial regulators. At the time of writing, the US is notable for its absence. NGFS has published a number of reports, and climate scenario modelling is an early focus of its work. For example, you can find the NFGS paper on environmental risk analysis on the
There is a growing trend in climate change litigation. and the Centre for Climate Change Economics and Policy have published . Thomson Reuters Practical Law covers climate law. It is a commercial subscription service and actuaries could reasonably expect their legal departments to have access to it.
The environmental charity is active in using the law to reach climate goals. There is currently a case before the Australian courts (NSD1333/2018) in which a member of a pension fund is seeking confirmation from the trustees that they have taken specific actions to support their public statements on the risks of climate change. In the UK a pension fund member took a complaint to that the fund would not provide all the information he had requested relating to how the fund was taking into consideration the potential risks of climate change.
In the UK the four principal financial regulators are developing their approach to the management of climate risk. This commenced publicly with the then-Governor of the Bank of England Mark Carney鈥檚 speech in September 2015. is a gateway to a number of resources including the 2015 insurance report and:
The UK government published its in 2019.
The Prudential Regulatory Authority (PRA), part of the Bank of England, published its in December 2019. This involves a Biennial Exploratory Scenario (BES) exercise. Although not formally a stress test, the objective of BES is to test the resilience of the largest banks and insurers to the physical and transition risks associated with different possible climate scenarios, and the financial system鈥檚 exposure more broadly to climate-related risk.
In March 2020 the FCA issued consultation paper CP20/3 . In October a set out the FCA鈥檚 plans to implement consistent climate-related disclosure requirements for asset managers and FCA-regulated pension schemes, and also references the cross-Whitehall/cross-regulator climate taskforce.
The PRA and FCA co-convened the (CFRF), an industry forum that seeks to build capacity and share best practice across financial regulators and industry to advance the sector鈥檚 responses to the financial risks from climate change. In June 2020 CFRF published an extensive guide together with a summary .
In February 2020 the Financial Reporting Council (FRC) announced a review to . More recently, the FRC published .
in the UK will be responsible for enforcing regulations yet to be issued for consultation, which will flow from the Pensions Bill currently before Parliament when enacted. Parts of the Bill deal with climate matters. The Bill should complete its passage through parliament in the autumn of 2020. In August 2020 the DWP published a consultation . This consultation proposes TCFD making reporting mandatory for large pension schemes. It is also the government鈥檚 intention that scenario analysis will increasingly be seen as best practice in the strategic risk management of climate change. The consultation proposes that trustees will use two scenarios on a best efforts basis.
UK parliamentary Select Committees are considering climate issues. In 2018 the House of Commons held a . This resulted in two reports, and the Committee also sent a letter to the UK鈥檚 25 largest pension funds seeking information on how they were tackling climate change. The Committee published their to this information. The Treasury Select Committee held a over 2020.
In preparing for COP26, the UK has appointed Nigel Topping as , working alongside the from COP25.
The EU has been developing the overlapping areas of climate and sustainability policy and regulation for some years. The EU Taxonomy is a classification tool aimed at investors, companies and financial institutions to define environmental performance of economic activities across a wide range of industries, and sets requirements that corporate activities must meet to be considered sustainable.
The Principles for Responsible Investment鈥檚 (PRI) is one place to start. This Finextra briefing gives a June 2020 update on the adoption by the EU parliament of the Taxonomy Regulation. An internet search will deliver many commercial providers offering analysis, advice and services around the taxonomy.
In Ireland the government published the in 2019. An 鈥淪outh Africa has put in place one of the most elaborate and consultative climate governance systems observable among developing and emerging economies.鈥� Columbia University鈥檚 School of International and Public Affairs has published an extensive . The IEA has published , as China introduces a national ETS in 2020.