Governance Briefing — August 26, 2025
Large U.S. banking organisations must show their boards are governing climate-related financial risks under the interagency principles adopted in 2023, with 2025 supervisory reviews expecting clear roles, scenario oversight, and risk reporting cadence.
Executive briefing: The Federal Reserve, OCC, and FDIC finalised joint Principles for Climate-Related Financial Risk Management for Large Financial Institutions in November 2023. By late 2025, boards need auditable evidence that governance, strategy, risk management, and scenario analysis disciplines are operating for climate exposures. Supervisors will evaluate how directors oversee climate risk appetite, integrate it with capital and liquidity planning, and ensure management information systems produce decision-ready metrics.
Board priorities for the 2025 exam cycle
- Define responsibilities. Document board and committee roles for climate oversight, including how they challenge management on risk identification, strategy alignment, and resilience planning.
- Embed risk appetite. Link climate risk tolerance statements to enterprise risk appetite, capital planning triggers, and compensation scorecards so decisions reflect supervisory expectations.
- Supervise scenario analysis. Approve scenario governance that explains climate pathways, frequency, and modelling limitations, and require management to present remediation plans for adverse outputs.
Risk management integration actions
- Data and reporting. Ensure management information systems aggregate climate exposures by geography, sector, and collateral so directors receive trend dashboards tied to materiality thresholds.
- Policy alignment. Map existing credit, market, operational, and legal policies to the interagency principles—closing gaps in due diligence, third-party oversight, and disclosures.
- Internal audit readiness. Direct internal audit to include climate governance in 2025 coverage, validating board reporting, escalation paths, and issue remediation timelines.
Enablement moves
- Commission management to deliver annual climate training for directors covering regulatory developments, modelling techniques, and cross-risk dependencies.
- Integrate climate metrics into enterprise dashboards presented alongside capital, liquidity, and operational risk so board packs show holistic impacts.
- Coordinate public disclosures and investor communications with the principles to avoid misalignment between regulatory filings, sustainability reports, and board minutes.
Zeph Tech equips boards with climate risk governance artefacts, linking scenario analysis, MIS, and risk appetite to interagency expectations.