In our previous post on CP10/25, we outlined the major changes expected by the PRA, following the CP10/25 update. In particular, we highlighted the move towards embedding climate risk into firms' core decision-making and governance processes.
CP10/25 and the accompanying draft Supervisory Statement (intended to replace SS3/19) provide a more granular view of the PRA's expectations. Understanding these details is critical for firms undertaking gap analyses and developing remediation plans.
This blog provides a breakdown of the proposals, reflecting the level of detail the PRA expects firms to consider as part of their own internal assessments.
1. Governance structures and resources
The PRA has observed inconsistent application of climate governance frameworks across business lines. CP10/25 proposes more specific expectations, including clear roles and responsibilities for board committees and an explicit requirement that the board ensures sufficient resources and expertise are allocated to climate risk management.
Suggested actions:
- Map existing governance structures against the draft expectations.
- Conduct a skills and resource gap analysis at board and executive levels.
- Ensure mandates, reporting lines, and committee terms of reference are clear and reflect climate responsibilities.
2. Board oversight and quality of analysis
Climate analysis provided to boards is often too high-level or generic, limiting the board’s ability to challenge or respond. CP10/25 proposes that firms provide clear, specific, and decision-useful analysis to support effective oversight.
Suggested actions:
- Review the clarity and strategic relevance of current climate board packs.
- Introduce or refine board-level KPIs and KRIs for climate.
- Ensure climate scenarios are linked to financial impacts over relevant time horizons.
3. Board training and expertise
The PRA is concerned that many boards are not equipped to challenge climate-related risk decisions. CP10/25 calls for tailored board training covering firm-specific methodologies and climate risk concepts.
Suggested actions:
- Assess climate literacy at board level.
- Develop or commission targeted training covering transmission channels, scenario analysis, and the firm’s internal methodologies.
- Schedule ongoing updates on climate-related risks and tools.
4. Strategy resilience and risk appetite alignment
The PRA wants clearer links between climate scenarios, strategic resilience, and risk appetite frameworks. Boards should be reviewing strategic performance under defined climate scenarios and overseeing the alignment of strategy and appetite.
Suggested actions:
- Integrate CSA outputs into strategic planning cycles.
- Test and evidence the resilience of current strategy to both transition and physical risks.
- Review risk appetite to ensure it is actionable, includes quantitative elements, and is understood across business lines.
5. Climate scenario analysis – rigour and integration
Scenario analysis remains underdeveloped in many firms. CP10/25 calls for deeper, more tailored use of CSA, with clear links to capital and risk decisions, and more widespread use of reverse stress testing.
Suggested actions:
- Enhance CSA methodologies and modelling capabilities.
- Formalise how CSA outputs feed into ICAAP, ILAAP, and strategy.
- Tailor scenarios to reflect specific portfolios, markets, and geographies.
- Introduce reverse stress tests into the CSA framework.
6. Risk management framework integration
The PRA expects climate risk to be integrated across credit, market, liquidity, and operational risk — not siloed or managed in parallel. Internal reporting should be more structured, and supported by metrics and limits.
Suggested actions:
- Update risk policies, procedures, and controls to include climate-specific elements.
- Define and cascade quantitative metrics for material climate risks.
- Improve internal climate reporting to ensure it supports decision-making.
- Evaluate physical and transition risks across operational resilience, including supply chains and third-party dependencies.
7. Banking specifics: Financial reporting, capital and liquidity
The PRA is raising the bar on how climate is treated in ECL, ICAAP, ILAAP, and related frameworks. It expects stronger justification for immateriality claims, better evidence of integration, and tighter links between scenario outputs and capital/liquidity decisions.
Suggested actions (for banks and lenders):
- Strengthen governance and controls around climate-related financial reporting.
- Refine methodologies for climate-adjusted ECL calculations, including PMAs.
- Document how CSA outputs influence ICAAP and ILAAP assessments.
- Ensure consistency across credit, market risk, and capital planning frameworks.
8. Data strategy and management
Data availability, quality, and standardisation remain material challenges. CP10/25 requires firms to take a more strategic approach to sourcing, validating, and governing climate data (both internal and third-party).
Suggested actions:
- Build a climate-specific data strategy covering risk, reporting, and disclosures.
- Invest in sourcing and validating key datasets (e.g. emissions, physical risk scores, transition plans).
- Implement quality controls and explore advanced analytics to support proxy use.
- Define governance for third-party data, including procurement and oversight processes.
9. Disclosures – aligning with evolving standards
The PRA continues to support alignment with international disclosure standards, particularly the UK Sustainability Reporting Standards (UK SRS). While it is not introducing new disclosure requirements in CP10/25, firms are expected to build the underlying capabilities needed to meet these standards.
Suggested actions:
- Prepare for future reporting under UK SRS, which will likely align with ISSB standards.
- Enhance voluntary disclosures to bridge to upcoming mandatory requirements.
- Strengthen internal data capture and process documentation to support assurance and reporting.
By addressing these nine areas with clarity and intent, firms will be better equipped to meet supervisory expectations, strengthen internal resilience, and lay the groundwork for credible, audit-ready climate risk management.
How Jaywing can help
Credit risk frameworks rarely fail in design. But often governance becomes diluted, models become static, data loses relevance, and documentation overtakes insight. That’s where external support can help.
Jaywing works with banks to conduct thorough gap analyses, develop pragmatic remediation plans, enhance specific framework components (such as MIS, stress testing, or governance effectiveness), and prepare for supervisory scrutiny.
To find out more, get in touch with our team today.