pra supervisors ’ judgements about the quality of a firm ’ s governance. we found that adding judgements about governance reduced our false alarm rates more often – and by more – for small firms than for large. this of course doesn ’ t mean governance isn ’ t important at larger firms – the opposite is true in our view. but it does suggest that supervising governance can be even more important for small firms. source : bank of england and bank calculations. notes : balance sheet data as of july 2007, taken from historical regulatory returns ( see sebastian j a de - ramon, william b francis and kristoffer milonas, ‘ an overview of the uk banking sector since the basel accord : insights from a new regulatory database ’, boe staff working paper no. 652 ( 2017 ) ). supervisors ’ scores for governance from historic fsa records ( see joel suss and henry treitel, ‘ predicting bank distress in the uk with machine learning ’, boe staff working paper no. 831 ( 2019 ) ). to test the robustness of our findings to definitional choices, results are shown for two different definitions of “ large ” and six different definitions of distress. the “ large banks ” panel shows results for all banks with total assets of £1bn or above, and separately calculated results for all banks with total assets of £5bn or above. for both of these definitions of “ large ”, results are separately calculated using six definitions of distress : 1 ) distress defined as receiving worst possible supervisory rating between july 2007 and december 2008 ; 2 ) receiving worst possible supervisory rating between july 2007 and december 2009 ; 3 ) any instance of default, receipt of state aid, or merger with or acquisition by another bank under stressed conditions between july 2007 and december 2008 ; 4 ) any instance of default, receipt of state aid, or merger with or acquisition by another bank under stressed conditions between july 2007 and december 2009 ; 5 ) meets definition 1 or 3 ; 6 ) meets definition 2 or 4. similarly, the “ small banks ” panel shows results for all banks with total assets of less than £1bn, and results for all banks with total assets of less than £5bn, in each case using all six definitions of distress. all speeches are available online at www. bankofengland. co. uk / news / speeches and @ boe _ pressoffice figure 2 : illustration of a graduated prudential framework under a graduated prudential framework, the regulatory rules a firm

capital. more specifically, all firms, from energy giants through to consumer goods producers, are encouraged to disclose their : - direct carbon emissions plus those from their energy consumption, in a consistent manner ( i. e. scope 1 and 2 ), complemented by any emission reduction targets that companies may set for themselves. - these can be supplemented, where judged appropriate, with upstream and downstream ( i. e. scope 3 ) emissions at the same time, the task force has set out sector - specific guidance for those sectors with the biggest carbon footprints and exposures. this will ensure investors know how much utility companies are investing in low carbon alternatives. and what progress car manufacturers are making towards fuel efficiency. scenario analysis the recommendations recognise also that static disclosures of current carbon footprints will not be sufficient to reveal a company ’ s climate - related financial risks and opportunities. for investors to price financial risks and opportunities correctly, they need to weigh firms ’ strategies against plausible public policy developments, technological advances and evolving physical risks and opportunities. in a ground breaking innovation, the task force recommends that companies explore and disclose the potential impacts of climate - related risks and opportunities on their businesses, strategies and financial planning under different potential future scenarios. a full exploration of transition risks may require consideration of financial risks and opportunities under several scenarios, which firms may develop directly or using commonly available models. reflecting the commitments made in paris, the task force recommends that this should include using a 2 - degree scenario. and consistent with the concept enshrined in the paris agreement of common but differentiated responsibilities, transition scenarios could take account of different national targets for emissions reduction. this makes them particularly useful for companies headquartered in emerging economies. all speeches are available online at www. bankofengland. co. uk / publications / pages / speeches / default. aspx over time, the task force expects to see a greater emphasis on quantitative analyses in scenario - related disclosures, including the underlying assumptions associated with the climate - related scenarios used. scope extends to asset owners and managers. a further important feature is the expectation that, where available, asset managers and owners will make disclosures of the aggregate greenhouse gas ( ghg ) emissions embedded in their investment portfolios. achieving broad coverage will take time and obviously depends on adoption by issuers. implementation we are pleased that all task force member organisations, companies with market capitalisations of around $ 1. 5 trillion and financial institutions responsible for assets of $ 20 trillion, have today announced their