The Prudential Authority (PA) issued a Guidance Note (GN) for banks and insurers that focuses on two “Flavour of the Year” topics: organisational resilience and climate-related risks. The PA has indicated that climate-risk will only be discussed with select financial institutions chosen on the basis of proportionality and relevance of the topic, and have set out their areas of focus in Annexure A of the GN. Given the global regulatory developments around climate-risk in the financial services industry, the intended engagement described within this Annexure is welcomed and much anticipated in the South African market and provides insight in terms of what can be expected by the PA going forward.
Annexure A largely encapsulates the messages and themes behind various international frameworks that have been widely adopted, including those of the Task Force on Climate-Related Financial Disclosures (TCFD). It focuses on 5 key areas:
For each of these areas of focus, the PA clearly lists the items they will cover with selected financial institutions.