5  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  5  Informed by these findings, the PRA will soon publish its final Supervisory Statement for banks, insurers and investment firms.10 This statement will set out the PRA’s expectations regarding firms’ approaches to managing the financial risks from climate change, including with respect to:   Governance, where firms will be expected to embed fully the consideration of climate risks into governance frameworks, including at board level, and assign responsibility for oversight of these risks to specific senior role holders;    Risk management, where firms will need to consider climate change in line with their boardapproved risk appetites;    The regular use of scenario analysis to test strategic resilience; and    Developing and maintaining an appropriate disclosure of climate risks. Recognising the need for industry to build capacity and to develop best practices, the PRA has established a Climate Financial Risk Forum, jointly with the FCA, to work with firms from across the financial system.11 The responses to our supervisory consultation reflect the urgency and significance of the issues. Perhaps for the first time in financial regulation, firms are both thanking their supervisors for raising an issue and pushing us to go further; with some asking for more prescriptive recommendations and others for mandatory disclosures.12 Certainly, while climate risk management is improving, there is more to do particularly when assessing strategic resilience. For companies, that means conducting scenario analysis.

It will expose the likely future cost of doing business, of paying for emissions, and of tighter regulation. It will help smooth price adjustments as opinions change, rather than concentrating in a climate “Minsky moment”. And it will allow feedback between the market and policymaking, making climate policy a bit more like monetary policy, with policymakers learning from markets’ reactions, and markets internalising policymakers’ objectives, strategies and instruments. 30  See: https://www.bnymellon.com/us/en/newsroom/news/press-releases/bny-mellon-debuts-service-to-evaluate-environmental-socialand-governance-factors-in-investment-performance-03-19-2019-newsid-13.jsp See: https://www.ubs.com/global/en/ubs-news/r-news-display-ndp/en-20190121-wef.html 32 See: https://www.ishares.com/us/strategies/sustainable-investing#esg 31  11  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  11  In this way, recent progress in disclosure, risk management and return optimisation is creating a path to a New Horizon. A virtuous circle is becoming possible where companies disclose more information, investors make better informed decisions, and sustainable investment goes mainstream. But the speed with which this market develops will be heavily influenced by the coherence and credibility of climate policies. Finance will complement - and potentially amplify – but never substitute for climate policy action. The policy frameworks with the greatest impact will be: time consistent (not arbitrarily changed); transparent (with clear targets, pricing and costing); and committed (through treaties, nationally determined contributions (NDCs), domestic legislation and consensus). As countries build their track records and their credibility grows, the market will allocate capital to deliver the necessary innovation and growth and pull forward the adjustment to a low carbon future.