Climate risk governance and organization

Climate-related risks are considered to be a systemic threat to the stability of the financial system due to their manifestation through a variety of different risks. Climate-related risks are embedded in our Group-wide risk taxonomy, supporting our risk identification efforts.

The Position & Client Risk (PCR) cycle of the Capital Allocation & Risk Management Committee (CARMC) is primarily responsible for acting as a governance and oversight function with respect to market, credit, reputational and sustainability risk-related matters, for Group and major Credit Suisse entities. As such, it assumes responsibility for the overall climate change strategy, jointly with legal entity board of directors risk committees where relevant.

The PCR cycle of CARMC meets on a bi-monthly basis, chaired by the Group Chief Risk & Compliance Officer, with representation from the CFO, General Counsel, Chief Risk and Compliance Officer (CRCO) functions and business divisions. Among other responsibilities, those closely linked with climate risk include:

  • Setting the strategy and risk appetite to market, credit, liquidity, reputational, sustainability, environmental, and social risks of a client or industry, across the various businesses within the Group, setting market-specific financial crime and reputational risk appetite for higher-risk markets, and serving as a risk appetite approval authority.
  • Ensuring that the capabilities for the management of relevant long-term risk trends, such as climate risks, are established.
  • Ensuring the Group-wide implementation of and compliance with the Group’s sustainability and reputational risk policy commitments and serving as a decision-making body for environmental and social issues.

The PCR cycle of CARMC ensures appropriate oversight of reputational and sustainability risks through the Global Client Risk Committee (GCRC), which reports to the PCR cycle of CARMC and is responsible for assessing clients and transactions based on defined escalation criteria across compliance, reputational and sustainability risk. For example, transactions rated “High Risk” by Sustainability Risk and transactions with clients categorized as “Unaware” (i.e. clients with the lowest categorization in terms of transition readiness) under our Client Energy Transition Frameworks (see pages 51-55) would require escalation to the GCRC.

A Climate Risk Strategy Steering Committee, established in 2019, provides overarching governance and guidance for Credit Suisse’s Climate Risk Strategy program (see pages 51-55 for more information) and is mandated to develop comprehensive strategies to address climate-related risks. This committee has senior management representation from our business divisions as well as from General Counsel, Risk & Compliance and the new Sustainability, Research & Investment Solutions function, with the participation of three Executive Board members, and it reports to PCR CARMC.

Furthermore, a Sustainability Risk Executive Leadership Committee chaired by the Chief Risk and Compliance Officer is in place to provide oversight on the implementation of the Group’s strategy with respect to managing sustainability and climate-related risks. This committee reports to PCR CARMC.

A dedicated Climate Risk team has been established with the mandate to set risk appetite and strategic trajectories in order to protect the bank’s portfolio from climate-related risks, across physical and transition risks, supporting our ambition to become a leader in this area. The Global Head of Reputational, Sustainability and Climate Risk, appointed in November 2020, brings extensive risk management experience from both wealth management and investment banking, including considerable knowledge of the risk appetite framework. Reporting directly to the Global Head of Credit Risk Management ensures that our Climate Risk Strategy is embedded in the broader risk management governance.