Since the June deadline passed, banks and insurers have been closing out their SS5/25 responses: materiality assessments filed, gap analyses reviewed, action plans approved. Having supported several banks through their SS5/25 response and discussed the approach with several more through the Practitioners' Forum we convened between January and March this year, five things stand out on reflection.
The CRMA is the whole game. With no firm guidance on proportionality beyond "risk, not simply size," the Climate Risk Materiality Assessment determines the scale of everything else a bank or insurer does on climate risk. SS5/25 encouraged firms to build a proper process and evidence base to support materiality judgements, which in many cases were previously somewhat finger-in-the-air. Having painstakingly designed an effective and proportionate CRMA process, and run it in anger several times over, we're clear the CRMA is the ticket to streamlining, strengthening and structuring the whole climate risk approach. Get this bit right and the rest of the pieces suddenly drop neatly into place.
Materiality is a scale, not a binary. SS5/25 can read like "take route A if climate risk is material, route B if it isn't", reinforcing the binary approach that shows up in many existing climate disclosures. However, if you have a well-designed CRMA and follow the “embed climate risk into existing processes” doctrine prescribed by SS5/25, financial risks from climate change will be spread across a spectrum on your firm’s existing risk likelihood / magnitude grid. Various manifestations of climate risk will show up across those nine to sixteen boxes, depending on financial risk type, time horizon and scenario. That's fine. The binary was never the right frame.
The data probably understate the risk. Across our Practitioners’ Forum, bank after bank reported running rigorous scenario analysis, from NGFS narratives to postcode-level Met Office flood projections, and arriving at low financial impacts, even over long horizons. “Is it the banks or the PRA who’s looking through the wrong end of the telescope?” one mid-market bank leader asked, kicking off a debate that continued over a few sessions. Our collective conclusion: the available data today increasingly looks like a floor on true impact, not a ceiling. The SS5/25 response is about building the internal capabilities to spot and respond when the data change, not just about guiding today’s actions.
Time to structure and streamline, steadily. For most, strategic climate risk, particularly the CRMA process, will earn a narrow policy of its own to cement its horizon-scanning, cross-cutting role in the risk taxonomy. Everywhere else, from credit to operations, climate belongs inside the risk type it actually sits within, owned locally by the teams who can best understand it and act. This is a major opportunity to refine, de-duplicate and fill gaps. And it can be done steadily over the next year or two, as the existing taxonomies, risk appetite statements, policies and KRIs naturally come up for review and annual risk and control self-assessments are refreshed.
Disclosures should sharpen. Most climate-related financial disclosures (TCFD or the Companies Act equivalent) to date have rambled: long tables of every possible materialisation of climate risk, vague mentions of processes involving "scenario analysis" or "expert review", rarely a true financial materiality threshold in sight. A genuine, structured CRMA process gives banks and insurers something they haven't had before: a real basis for linking climate risk to different levels of financial risk, concisely and with a clear trail of evidence and judgements. If they reflect this, FY26 disclosures should read very differently, which will also serve listed banks well heading into the UK's incoming Sustainability Reporting Standards.
Unusually, for new regulations, many firms now see a clear route to a more efficient, easily articulated, and streamlined approach to climate risk. As the initial SS5/25 action plan items are ticked off, a firm’s climate risk foundations will be strengthened so they can confidently accommodate new data, more sophisticated scenario analysis, and embedding of climate in processes such as ICAAP, ILAAP and ECL. Yet as risk identification matures, through the annual CRMA and suite of climate KRIs across other financial risk types, so too will the SS5/25 action plan evolve. None of this closed with the PRA’s June 2026 deadline. Which may also be a reassurance to those firms who don’t yet feel they have harnessed the full benefits of SS5/25 that are advocated above.
