The PRA wants climate risk management to move beyond framework design
SS5/25 is the PRA's updated supervisory statement on climate-related risks for banks and insurers. The important point is not that climate risk is a new topic. It is that the PRA now expects firms to show more mature, more evidence-based capabilities than were implied by the earlier 2019 statement. This is a reset from building climate frameworks to proving that climate-related risks are being governed, measured and used in real decisions.
The statement replaces SS3/19 and pulls together years of thematic feedback, international standard-setting and supervisory learning. In the PRA's own framing, firms have made progress, but understanding remains uneven and many institutions still want clearer guidance on what good looks like. SS5/25 is the PRA's answer to that request for clarity.
What the updated expectations actually cover
The scope is broad. The statement applies across banks, building societies, PRA-designated investment firms, insurers and reinsurers within scope, though not overseas branches operating in the UK. It sets expectations across governance, risk management, climate scenario analysis, data and disclosures, with additional bank-specific and insurer-specific chapters. That structure tells firms something important: climate risk is not being treated as a niche ESG workstream. It is being embedded across prudential management disciplines.
The PRA also re-states how climate-related risks reach firms. Physical risk and transition risk remain the main transmission channels, while climate-related litigation may be treated either as its own channel or as a subset of the others depending on the firm's business and risk profile. The statement emphasizes three features that make climate risks different from more familiar risk classes: they are systemic, uncertain in scale and timing but still foreseeable to some extent, and highly shaped by actions taken now. That combination is why the PRA expects a strategic rather than purely tactical management response.
Why this matters for boards, risk and finance teams
What has changed in substance is the expected level of integration. Boards and senior management are expected to oversee climate-related risks through the same core disciplines that govern other material financial and operational risks. For risk teams, that means climate issues need to be identifiable within appetite, policies, limits, controls and scenario analysis rather than sitting in a separate sustainability narrative. For finance teams, it means sharper attention to data, assumptions, disclosures and the way climate effects feed impairment, valuation and capital conversations.
The statement also matters because it is designed to align the PRA more closely with newer international standards, including Basel Committee guidance and the ISSB climate disclosure framework. So this is not just a domestic UK tidy-up. Firms should read it as part of a wider supervisory convergence in which climate risk management is expected to look more disciplined, more decision-useful and more comparable across institutions.
What firms should do now
The practical question is no longer whether a firm has a climate programme. It is whether climate-related risks are visible in the places where real prudential decisions are made. Firms should test whether board packs, risk committee challenge, scenario design, data lineage, management information and disclosures tell a coherent story. Where those pieces still live in separate teams with different assumptions, the weakness will become more obvious under supervision.
In our view, the priority areas are governance evidence, risk management integration, decision-useful scenario analysis and data quality. Banks should expect scrutiny on how climate risk affects credit, concentration, strategy and balance sheet resilience. Insurers should expect the same on underwriting, reserving, investments and exposure management. The firms that do best under SS5/25 will be the ones that treat climate risk less as a reporting topic and more as a live prudential management capability.