Fourth Annual Global Survey of Climate Risk Management at Financial Firms

GARP Risk Institute (GRI) recently completed its fourth annual Global Survey of Climate Risk Management at Financial Firms. Surveying 62 top firms with a collective USD 43 trillion of balance sheet assets, GRI's comprehensive 2022 report offers updated, independent insights into climate risk management across the financial system today, along with exposing the challenges companies are facing in incorporating climate risk into business-as-usual risk management.

Key Takeaways

Supervisory activity on climate risk has intensified further in 2022. Nearly 90% of firms report that their regulators have published formal expectations for climate risk management, while nearly 80% say that regulators are now requiring them to report their climate-related risks.

Around three-quarters of firms said that they look beyond climate risks to other environmental risks, including water, air pollution, and biodiversity loss. Many firms already felt well prepared (39%), or somewhat prepared (34%), for regulatory developments around other environmental risks.

Risk staffing and training are on the rise. Over the past two years, 67% of firms reported significant increases in staff working on climate risk, and firms expect to hire more staff in the coming two years. Ninety-five percent of firms offer training to multiple business areas, with more than 40% offering it to their entire staff.

There has been a marked increase in the use of metrics, targets, and limits. Ninety percent of the firms now use metrics, around 75% use targets, and just over 50% use limits.

Despite the progress that has been made, short-term challenges remain. Firms cited the availability of data (82%), availability of reliable models (72%), and regulatory uncertainty (45%) as their greatest short-term concerns.

About the authors

Jo Paisley, President, GARP Risk Institute (GRI), has worked on a variety of risk areas at GRI, including stress testing, operational resilience, model risk management, and climate risk. Her career prior to joining GARP spanned public and private sectors, including working as the Director of the Supervisory Risk Specialist Division within the Prudential Regulation Authority and as Global Head of Stress Testing at HSBC.

Maxine Nelson, Senior Vice President, GARP Risk Institute (GRI), currently focuses on climate risk management. She has extensive experience in risk, capital, and regulations gained from a wide variety of roles across firms including Head of Capital Planning at HSBC. She also previously worked at the UK Financial Services Authority, where she was responsible for counterparty credit risk during the last financial crisis.