The Prudential Regulation Authority published Supervisory Statement SS5/25 on 3 December 2025, replacing the climate risk framework it had issued in 2019 with updated expectations that take immediate effect for banks and insurers operating under its supervision. The new statement introduces a proportionate framework in which the depth and breadth of work expected from a firm is calibrated to the materiality of its climate-related exposures rather than simply to its size or systemic importance.
The 2019 framework was contained in the original SS3/19.
PROPORTIONALITY AND MATERIALITY
SS5/25 applies a proportionality principle, which requires firms to scale their climate risk management work to the materiality of their actual exposures rather than applying a uniform standard across all regulated entities.
The PRA has also confirmed in the statement that no standalone capital charge for climate risk will be introduced at this stage. Instead, banks are expected to embed climate risks into their Internal Capital Adequacy Assessment Process and their Internal Liquidity Adequacy Assessment Process where those risks are assessed to be material.
IMPLEMENTATION AND SUPERVISORY FOLLOW-THROUGH
SS5/25 took effect on publication, with firms expected to complete an internal review of their position against the new expectations, and a plan to close any gaps, within six months. The PRA has indicated that it will assess compliance through its normal supervisory channels, including firm-specific reviews and the internal assessments that form part of the annual supervisory cycle.
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