UK Finance responded to the Bank of England's Discussion Paper on climate change scenario testing. We supported the Bank in its very ambitious plans to undertake a comprehensive analysis of the financial risks arising from Climate Change over the next 50 years.

The Discussion Paper proposes that banks interact with 80% of the companies they lend to about their planned strategic responses to climate change, both in terms of the physical and transitional risks they face. Instead we recommended a tiered approach  to borrower engagement, focusing in-depth analysis on those industries that have most to contribute to ensuring a net zero emissions target is met by 2050, with other counterparties being subject to a more top down approach. We proposed that banks should work with the Bank of England to identify key industries and cooperatively develop common methodologies to ensure that analysis performed by individual banks can be aggregated so that useful conclusions to be drawn.