SS5/25 – Enhancing banks’ and insurers’ approaches to managing climate-related risks
Executive Summary
SS5/25 is the PRA's updated supervisory statement, published on 3 December 2025, replacing SS3/19 and setting enhanced expectations for banks and insurers to manage climate-related risks through governance, risk management, scenario analysis, data quality, and disclosures. It matters because it represents a step change from awareness-raising to embedding robust, proportionate practices that integrate climate risks into core prudential processes like ICAAP, ILAAP, ORSA, and capital planning, aligning with the PRA's objectives for firm safety and soundness amid evolving physical and transition risks. #
What Changed
- Replaces SS3/19 entirely: Introduces a more mature, consolidated framework reflecting international standards (e.g., BCBS), with detailed transmission channels for climate risks across credit, market, liquidity, insurance, and operational categories. - Governance enhancements: Emphasizes board accountability, integration into business strategy, climate risk appetite statements, and linkage to Senior Managers & Certification Regime (SM&CR) without new Senior Management Functions (SMFs); promotes challenge culture and Management Information (MI). - Risk management integration: Requires embedding climate risks into existing frameworks with quantitative metrics/limits where material; detailed mapping of risks (e.g., physical/transition via credit/market); documentation of controls, escalatio
What You Need To Do
- Conduct materiality assessment of climate risks to scope proportionality (leverage TCFD/CSRD work)
- Embed climate risks in governance
- Integrate into risk frameworks
- Perform climate scenario analysis
- Enhance data
- Document and evidence
Key Dates
Compliance Impact
Urgency: High – Effective immediately with a 6-month window (~June 2026) for gap closure, this demands significant operational uplift (e.g., data, scenarios, integration) amid PRA's shift to enforcement; non-compliance risks supervisory action, given climate risks' materiality to prudential stability and alignment with global standards.
Who is Affected
Summary
Supervisory statement 5/25