PRA updates supervisory expectations for managing climate-related risks

The Prudential Regulation Authority (PRA) has published PS25/25 and finalised SS4/25, replacing SS3/19, to update supervisory expectations for banks and insurers on managing climate-related risks, effective 3 December 2025.

• Final policy and immediate effect: The PRA replaces SS3/19 in its entirety with SS4/25, effective on publication 3 December 2025; firms are expected to conduct an internal review and develop action plans within six months of commencement but are not required to close all gaps within that period. The PRA received 59 responses to CP10/25 and made clarificatory changes on proportionality, scenario analysis, data expectations, governance, and litigation risk; it invites the Climate Financial Risk Forum (CFRF) to update guidance and case studies to support firms.
• Programmatic clarifications and scope: The final policy emphasises proportionate application based on business model and geographical exposure, clarifies the six-month review is for gap analysis and planning (not immediate implementation), recognises litigation risk may be treated as a distinct transmission channel depending on firm judgement, and adjusts data expectations from requiring quantification of uncertainty to requiring firms to understand data uncertainty and use appropriate proxies where necessary.