Supporting Climate Risk Materiality Assessment under PRA SS5/25: A Hazard-Led Approach

A hazard-only, portfolio-wide framework aligned to supervisory expectation

Map Impact Whitepaper, January 2026

 

Executive Summary

The Prudential Regulation Authority’s Supervisory Statement 5/25 (SS5/25) marks a clear shift in regulatory expectations for the management of climate-related financial risks. Regulated firms are now required to demonstrate evidence-based, portfolio-level assessments of physical climate risk materiality, supported by transparent data, documented assumptions and appropriate governance. Within six months of SS5/25’s publication, firms must complete a gap analysis and prepare a Board-approved implementation plan, signalling an immediate supervisory focus on capability rather than aspiration.

A central challenge for many firms is the lack of consistent, property-level physical climate hazard data capable of supporting defensible materiality assessments across portfolios. Legacy approaches, often limited to flood and coastal erosion, provide an incomplete view of physical climate risk and are insufficient to meet SS5/25’s expectations, where other hazards such as heat stress, drought and wildfire may be relevant.

This technical white paper sets out a hazard-led approach to supporting SS5/25 implementation. It explains how Map Impact’s physical climate hazard datasets are constructed, how they align with supervisory expectations for data suitability and governance, and how they may be used by regulated firms as inputs to materiality assessment, scenario analysis and internal model development. The paper is explicitly scoped to hazard identification and interpretation. Map Impact provides hazard scores, hazard categories and scenario-aligned hazard deltas only; it does not estimate probability, vulnerability, exposure or financial loss.

By maintaining a clear separation between hazard inputs and firm-owned risk modelling, the approach described supports proportionality, model risk management and supervisory challenge. High-resolution, property-level hazard data enables firms to identify where physical climate risks may be material, justify qualitative or quantitative treatment, and embed climate considerations into existing credit, capital and governance frameworks without over-engineering or opacity.

This paper is intended for first-line risk and modelling teams, as well as second-line risk, model valuation, internal audit, and regulatory liaison functions involved in the review, governance and supervisory justification of climate-related data and methodologies.

 

To download the full whitepaper, please provide your details.