Physical climate risk data,
ready for SS5/25.
UK's toughest climate regulation. Are you ready? SS5/25 replaces SS3/19 with 140 paragraphs of sharper expectations across governance, risk, scenario analysis, data and disclosures. The clock is ticking.
SS5/25 is the PRA's updated supervisory statement on climate-related financial risk management, in force since 3 December 2025. 140 paragraphs across seven chapters: governance, risk management, climate scenario analysis, data, disclosures, and banking and insurance specifics. Replaces SS3/19 in its entirety, alongside Policy Statement PS25/25.
UK banks, building societies, PRA-designated investment firms, and (re)insurers (Solvency II, non-Solvency II, Lloyd's and managing agents). UK branches of overseas firms are out of scope. Proportionality is based on materiality of exposure, not firm size: smaller firms with material climate risk still meet the detailed expectations. Board-reviewed gap analysis and credible action plans due by 3 June 2026.
SS5/25: A step change, not an update.
Published on 3 December 2025, the Supervisory Statement 5/25 consolidates every Dear CEO/CFO letter, climate adaptation report and thematic review into a single, structured framework.
Climate risk is now a first-order financial risk under SS5/25.
The PRA now treats climate on a par with credit, market and liquidity risk, not as a sustainability topic.
It's a prudential matter.
Embedded into existing governance, risk management and control frameworks, not a sidecar sustainability workstream.
Every sector. Every portfolio.
Physical and transition risks crystallize through credit, market, liquidity, underwriting and reserving, simultaneously, across geographies.
Forward-looking, or too late.
Once physical risks manifest systemically, many effects cannot be reversed. Historical data cannot tell you what 2030, 2050 or 2100 looks like.
The SS5/25 framework: seven chapters from governance to insurance.
Click each chapter to unpack what the PRA expects, and where most firms are falling short.
-
Chapter 1: Governance
Board-owned, not board-briefed.
The board must actively oversee climate risk, not just receive updates. Accountability, structure and challenges all need to be demonstrable.
- Clear board ownership with documented climate risk appetite
- Senior management accountability for climate oversight
- Climate embedded into strategic decision-making
- Evidence of board challenge
-
Chapter 2: Risk Management
Treat climate as credit risk's cousin.
Material climate risks must be captured in the risk register, classified by risk channel, and folded into ICAAP, ILAAP and ORSA.
- Periodic, structured climate risk identification
- Materiality judgments substantiated inside ICAAP, ILAAP and ORSA
- Classification: accept, manage or avoid, with imminence
- Counterparty, investee and policyholder exposures assessed
-
Chapter 3: Climate Scenario Analysis
Scenarios with teeth, not theater.
CSA must inform strategy, capital setting and valuation. Larger exposures demand more mathematically sophisticated approaches.
- Document methodologies, assumptions and calibration
- Justify scenario selection against IPCC / NGFS benchmarks
- Cover central case plus tail-risk intensifications
- Evidence how CSA drives decisions in ALCO / Board packs
-
Chapter 4: Data
Where most firms break.
Postcode averages are over. The PRA expects property-level granularity, forward-looking horizons and documented lineage for every proxy used.
- Asset-level exposure, not postcode averages
- Forward-looking to 2030, 2050, 2100 under multiple pathways
- Climate data inventories with owners, lineage and uncertainties
- Proxies disclosed and justified, not quietly applied
-
Chapter 5: Disclosures
Decision-useful. Not decoration.
Firms must align with TCFD today and prepare for UK SRS / ISSB. Disclosures must be comparable, defensible and tied to actual business decisions.
- TCFD-aligned, moving to UK SRS / ISSB as they're adopted
- Your climate disclosures and ICAAP should tell the same story
- Clear linkage to governance, strategy and risk metrics
- Disclosures to keep pace as climate risk assessment matures
-
Chapter 6: Banking-specific
From origination to expected credit loss.
Climate must be embedded into origination, underwriting, ECL, collateral valuation and capital planning, not bolted on as a reporting exercise.
- Climate factors in origination and underwriting decisions
- IFRS 9 ECL reflective of climate-related PD/LGD
- Collateral valuation accounting for physical risk
- Sector and counterparty limits informed by CSA
-
Chapter 7: Insurance-specific
ORSA, SCR and the long tail.
Insurers must embed climate into underwriting, reserving, ORSA stress and scenario testing, and SCR, unless materiality is clearly and defensibly immaterial.
- Climate embedded in underwriting and reserving methodologies
- ORSA-level stress and scenario testing
- SCR calibrated for physical and transition exposures
- Solvency II / non-Solvency II and Lloyd's, all in scope
Good data is no longer optional.
SS5/25 sits alongside SS1/23 on model risk management. Greater climate exposure demands greater rigor, and external methodologies must be defensible under PRA review.
More Risk, More Rigor
Firms with greater climate exposure must invest in more granular, sophisticated data capabilities.
Asset / Counterparty Level Granularity
Granularity of risk data needs to be sufficient to capture physical and transition risks, such as asset level for flooding.
Climate Scenario Analysis is Key
Historical data cannot answer this. Scenarios must be proportionate, diverse, and scientifically grounded.
Justify your proxies and acknowledge uncertainties
Firms must document data gaps, uncertainties and explain assumptions behind any proxies used.
Models fit for scrutiny (SS1/23)
External supplier methodologies must be clearly documented, tested and defensible under PRA review.
Physical climate risk data, built for SS5/25 and PRA scrutiny.
Spectra is the asset-level physical climate risk platform behind climate scenario analysis at banks and insurers managing $13.5 trillion+ in combined AUM. One data spine carries SS5/25 governance evidence, ICAAP/ILAAP/ORSA scenarios, ECL adjustments, SCR calibration, and TCFD-aligned disclosures.
Asset-level exposure, 2bn+ assets
UK property-level flood, coastal, subsidence, heat and wildfire exposure at the granularity SS5/25 Chapter 4 expects. Postcode averages won't survive PRA review. Address-level lineage and uncertainty flags travel with every data point.
Multi-pathway scenarios
SS5/25 Chapter 3 expects scenarios calibrated against IPCC and NGFS benchmarks, with central case plus tail-risk intensifications. Spectra delivers CMIP6 SSPs, CMIP5 RCPs and NGFS pathways across 2030, 2050 and 2100 horizons, with documented assumptions for ICAAP, ILAAP and ORSA.
Hazard to financial impact
Banks need climate-adjusted PD, LGD and collateral valuation for IFRS 9 ECL. Insurers need physical and transition exposures for SCR. Spectra translates hazard data into expected loss in pounds, ready for capital and reserving inputs.
SS1/23 model risk ready
External methodologies must be defensible under PRA review and consistent with SS1/23 model risk management principles. ISO 27001 and ISO 14001 certified, full methodology documentation, transparent uncertainties, and parallel filings for IFRS S2, AASB S2, CSDS and ESRS E1 from one data spine.
Are you ready for SS5/25 climate risk management?
Seven questions, one per chapter. Not audit-grade, but a useful gut-check before your board-reviewed gap analysis.
SS5/25 readiness self-check
SS5/25: the questions banks and insurers are asking right now.
What is SS5/25?
SS5/25 is the PRA's updated Supervisory Statement on managing climate-related financial risks, published on 3 December 2025 alongside Policy Statement PS25/25. It replaces SS3/19 in its entirety. SS5/25 has 140 paragraphs (compared to 32 in SS3/19) organised into seven chapters: governance, risk management, climate scenario analysis, data, disclosures, banking-specific issues and insurance-specific issues. The PRA describes it as a step change, not a refinement: climate risk is now treated on a par with credit, market and liquidity risk.
Who has to comply with SS5/25?
SS5/25 applies to all UK PRA-regulated banks, building societies, PRA-designated investment firms and (re)insurers, including Solvency II firms, non-Solvency II firms, Lloyd's and managing agents. UK branches of overseas firms are out of scope. Proportionality is based on materiality of climate-related risk exposure, not firm size: smaller firms with material exposures still meet the detailed expectations.
What's the 3 June 2026 deadline?
By 3 June 2026, firms are expected to complete an internal gap analysis against SS5/25 and have a credible and ambitious plan to address any gaps, with board sign-off on materiality assessments. The PRA has been explicit that this six-month window is not an implementation period: firms are not expected to have closed gaps by 3 June, only to have an internal review and plan in place. Supervisors will only begin requesting evidence of internal reviews and action plans after this date.
What's the difference between SS5/25 and SS3/19?
SS3/19 (2019) was a wake-up call to start embedding climate risks. SS5/25 is the prudential framework: a fourfold increase in paragraphs, sharper expectations, climate risk explicitly on par with credit, market and liquidity risk. Key shifts include integration into ICAAP, ILAAP and ORSA; a documented risk register with materiality judgments substantiated; asset-level data rather than postcode averages; and CSA that demonstrably drives ALCO and board decisions. SS5/25 is also explicitly aligned with the BCBS climate principles and the ISSB disclosure baseline.
What scenarios does SS5/25 expect?
SS5/25 Chapter 3 expects multi-pathway scenario analysis calibrated against IPCC and NGFS benchmarks, with a central case plus tail-risk intensifications. Methodologies, assumptions and calibration must be documented; firms with larger exposures are expected to use more mathematically sophisticated approaches. CSA must demonstrably flow into strategic decisions: ALCO and board packs, ICAAP, ILAAP and ORSA, capital and reserving, and counterparty and sector limits. Historical data alone cannot answer the forward-looking questions SS5/25 asks.
How does Climate X help with SS5/25?
Climate X provides asset-level physical climate risk data built for SS5/25 Chapter 4 data expectations and the scenario analysis Chapter 3 demands. The Spectra platform covers 2 billion+ assets globally with 11 hazards, multi-pathway scenarios using IPCC CMIP6 SSPs, CMIP5 RCPs and NGFS pathways across 2030, 2050 and 2100 horizons, and translation of hazard exposure into expected loss in pounds for IFRS 9 ECL banking inputs and SCR insurance calibration. Methodology is ISO 27001 and ISO 14001 certified and built to be defensible against SS1/23 model risk principles. Explore Spectra or talk to a climate risk expert about your gap analysis.
The clock is ticking.
Are you ready?
