Understanding SS4/25: What the Updated Climate-Risk Expectations Mean for FS Firms

With climate risk now firmly embedded within operational resilience expectations, we explore how FSQS members are already well placed to meet the PRA’s enhanced requirements. 

The PRA’s updated supervisory statement, SS4/25, signals a continued strengthening of expectations around how banks, insurers and other regulated firms manage climate-related financial risks, particularly within their supply chains. Climate risk is now firmly part of the regulatory mainstream, woven into operational resilience, governance, and third-party oversight requirements. 

For many financial institutions, this raises familiar questions: Do we have the correct data? Are our supplier assessments robust enough? Can we evidence our approach? 

For organisations within the FSQS community, much of this information is already readily available. 

What SS4/25 Introduces 

SS4/25 builds on the earlier SS3/19 guidance and clarifies where firms must enhance their oversight of third parties. The key areas include: 

• Embedding climate-related considerations into supplier due diligence and ongoing monitoring
  Firms must demonstrate that climate risk is assessed consistently across their supply base. 

• Identifying suppliers that introduce or are exposed to material climate-related risks
  This may increase the number of suppliers considered relevant from a risk perspective. 

• Ensuring third-party arrangements align with the firm’s climate-risk appetite
  Buyers will need to be able to test their supplier arrangements against a clear risk appetite 

• Validating assumptions and methodologies used by external tools and data providers
  Transparency becomes critical. Firms need to understand how supplier data is captured. 

• Factoring climate risks into business continuity planning for critical suppliers
  Climate resilience becomes part of operational resilience management. 

These developments broaden the scope of third-party oversight and place renewed emphasis on evidence, traceability and a transparent approach. 

What does SS4/25 mean for Financial Services Organisations? 

For many regulated companies, the challenge lies in demonstrating that they can access reliable, consistent supplier information and apply it across their supplier lifecycle.

SS4/25 reinforces the need for: 

• Verifiable supplier responses. 

• Comparable datasets. 

• Clarity over how climate-related assessments are formed. 

• Confidence that methodologies can be explained and defended. 

This is especially important given the increased regulatory scrutiny on external data and model providers. 

Does FSQS Support SS4/25 Expectations? 

Firms participating in FSQS already have a strong foundation aligned to the updated requirements. Our Sustainability Analysis tool provides: 

• Transparent, reviewable methodologies – supporting organisations obligation to validate climate-data assumptions. 

• Structured, standardised supplier responses – enabling consistent due diligence and monitoring. 

• Evidence-based submissions – helping orgnisations demonstrate traceability and audit readiness. 

• Clear linkages to climate-risk factors – aiding identification of suppliers with higher risk exposure. 

• Comparability across suppliers and sectors – vital for assessing materiality and prioritising resources. 

In short, FSQS members are already well-positioned: the essential information required under SS4/25 is accessible through a framework designed to support regulatory expectations. 

Looking Ahead 

The introduction of SS4/25 highlights the continued integration of climate risk into operational resilience and third-party management. As expectations advance, the need for reliable, transparent supplier data becomes more important - not just for compliance, but for strategic risk management. 

For organisations already within the FSQS ecosystem, this update reinforces the value of the collective approach: shared standards, transparent methodologies and consistent data that can be relied upon in an increasingly demanding regulatory landscape.