SS5/25, Managing climate-related risks

Supervisory Statement 5/25 on improving banks' and insurers' approaches to managing climate-related risks, published by the Prudential Regulation Authority (PRA), replaces SS3/19 and updates the supervisory framework on climate risks. The document reinforces the role of banks and insurers in identifying and managing physical and transition risks, and aligns the PRA's expectations with recent developments in international standards on governance, risk management, data, scenario analysis, and climate disclosure.

SS5/25, Managing climate-related risks

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Executive summary

The PRA’s Supervisory Statement 5/25 updates and expands the previous framework, setting out clearer and more prescriptive expectations on how to apply the principles of risk management, governance, and control to the climate domain. The document organizes these expectations into seven chapters (governance, risk management, climate scenario analysis, data, disclosure, and specific banking and insurance issues) and establishes a proportional and materiality-based approach to implementation. These expectations should be reflected in risk registers, risk appetite, and prudential decision-making processes. 

Firms must complete a gap analysis within six months, by 3 June 2026, and prepare a credible remediation plan.

Main content

Supervisory Statement 5/25 covers the following key areas: 

• Governance. Expectations are strengthened regarding Board oversight, the clarity of governance structures and the definition of climate risk appetite, ensuring strategic alignment with climate-related risks across the business.
• Risk management. Climate risks must be identified, assessed, measured and reported consistently across all exposures and integrated into existing risk registers and metrics.
• Scenario analysis. Climate scenario analysis should become a strategic, governance-driven tool, supported by robust design and well-calibrated scenarios that enable firms to understand and manage climate vulnerabilities.
• Data and disclosures. Firms must address data gaps, ensure the reliability of proxies and external data, and provide clear, consistent disclosures aligned with supervisory expectations.
• Banking-specific issues. Banks must integrate climate risks into reporting, credit granting and prudential planning, relying on forward-looking models and well-governed processes.
• Insurance-specific issues. Insurers must embed climate risks into Asset and Liabilities Management (ALM), the Own Risk and Solvency Assessment (ORSA), underwriting and reserving. They must use granular scenarios and prudent assumptions to manage long-term financial and non-financial impacts.

Download the technical note on the SS5/25, Managing climate-related risks.