The BoE has released a new supervisory statement — SS 4/25 — replacing its 2019 guidance, with significantly strengthened expectations for how banks and insurers manage climate-related financial risks.

Under the updated framework, firms must ensure stronger governance: boards and senior management are required to take active oversight of climate risk. Risk-management frameworks must be more robust, with transparent methodologies, scenario-analysis capabilities, and improved data quality for climate-related decision-making.

The policy also sets stricter disclosure requirements: firms are expected to align their reporting with evolving international standards and disclose climate-related risks and opportunities.

The BoE emphasized the update is necessary because, despite some progress since 2019, adoption has been uneven — and increasing frequency and severity of climate events pose real threats to financial-system resilience.

Firms will need to conduct an internal review to assess where they fall short under SS 4/25, and develop credible plans to address any gaps. Supervisors will likely request evidence of compliance within a defined timeframe.