Climate Transition Plans for UK Banks — What PRA SS5/25 Means for Financial Services

The PRA just made climate transition plans compulsory for UK banks.

Less than a third have one in place.

And there's real danger that panic and compliance deadlines could make matters worse than having no plan at all.

A quick note: a "climate transition plan" is how a bank plans to align its activities to the Paris Agreement — limiting warming to one and a half degrees whilst adapting to what's already baked in.

Where are we now?

On 3 December 2025 the PRA issued Supervisory Statement SS5/25, which raises the bar on expectations for banks and insurers considerably. There's a specific clause that says if you've got net zero targets, you need to show how you'll actually meet them. Not aspirations. A plan.

We track 57 UK and Irish banks as part of our annual benchmarking. Thirty-five are PRA-regulated with net zero targets. Only nineteen say they have a transition plan. That's sixteen firms with no plan. Furthermore, eight of those nineteen that claim to have one don't publish it — which suggests they think it might not stand up to scrutiny.

There's also a footnote worth noting. The PRA makes a point about firms operating in jurisdictions with national climate targets, like the UK. The subtext suggests that appearing disconnected from that looks odd. Twenty-two banks in our cohort operate in the UK but have no net zero target. That's increasingly difficult to explain.

Where might banks go wrong?

The main risk is rushing into tick-box compliance. This needs the same rigour as setting corporate strategy. Because that's what it is. A wallpaper version that sits in a drawer, or something reverse-engineered to tick disclosure frameworks, misses the point entirely.

A good transition plan builds resilience. A bad one can reduce it more than not having one at all.

So what should banks do?

First: don't rush. You've got until June 2026 to produce a plan for a plan. There's strong rationale for taking time and embedding this properly into your corporate strategy process.

Second: be thoughtful about targets. You can only target net zero for so long before people expect to see action. This update cements that.

Third: this doesn't mean avoiding ambition. Yes, reducing financed emissions is complex. But we'll never crack it without a critical mass working on it. Early-stage transition levers might focus on data foundations, engagement, or education. That's credible. It won't move the numbers yet, but it's real work.

Finally: use disclosure frameworks with care. They're guardrails, not strategic planning processes.

What's the upside?

A good transition plan brings the same advantages as good corporate strategy: better access to capital, improved efficiency, clearer foresight on risks, new revenue opportunities.

This is a genuine opportunity to strengthen resilience across the financial sector and the real economy.

If you're figuring out how to approach this, we spend our lives on it. Always happy to share what we're seeing work and discuss how your bank might best approach transition planning.