(Bloomberg) --

The Bank of England said it will accelerate its efforts to ensure the financial industry is dealing with the risks from climate change next year. 

The BOE’s regulatory unit will switch its approach from focusing on whether firms are meeting its expectations on climate risk to “actively supervising against them,” the central bank said in a report Thursday. 

The U.K. has been at forefront of pushing banks and insurers to prepare for the fallout from extreme weather or potential losses on loans if polluting companies go out of business. The BOE acknowledged that challenges like a lack of data persist but said financial firms still need to get to grips with risks relating to climate or face regulatory consequences.

The BOE will ask companies that aren’t making sufficient progress to make “clear plans” and will consider using its powers and “wider supervisory toolkit” if necessary. 

Starting next year, that could include “risk management and governance related capital scalars or capital add-ons” and appointing a so-called skilled persons review.

In a report also published Thursday, the U.K. Financial Conduct Authority warned that “greenwashing” poses a potential risk for retail investors in ESG funds. The watchdog has stressed to fund mangers the “importance of clear and accurate” disclosures where ESG-related claims are made.

FCA also said that more needs to be done in the mortgage sector, adding that it doesn’t see “significant, widespread changes in lenders’ behavior in response to climate change outside their usual risk calculations.” FCA said it shared the concerns of the BOE’s Prudential Regulation Authority that banks need to be taking a “strategic and organization-wide approach” to climate change, including both their mortgage and financing activities.

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