Gabriella Lovas interviews President of the GARP Risk Institute, Jo Paisley

Interview Feature
Jo Paisley, President, GARP Risk Institute
Interviewed by Gabriella Lovas, Sustainability & Finance Writer

 

Jo Paisley’s career began at the Bank of England where she worked in various economist roles, ran the Statistics Division and spent the last part of her career in Supervision. Her last role was as a Director of the Supervisory Risk Specialist Division within the Prudential Regulation Authority. This area provided deep technical risk expertise to front line supervisors across all risk disciplines, covering banking and insurance. She was also heavily involved in the design and execution of the UK’s first concurrent stress test in 2014.

She left the Bank in 2015 and joined HSBC as their Global Head of Stress Testing, where she was responsible for ensuring that they met all their regulatory stress testing requirements around the world. She has also worked as an independent stress testing consultant, advising firms on how to get the most value out of stress testing. Jo studied Philosophy, Politics and Economics at Magdalen College, Oxford, before completing her MPhil in Economics at Nuffield College, Oxford.

 

Gabriella Lovas is a sustainability and finance writer, consultant and business Analyst with over 15 years of experience spanning ESG, nature disclosures, and financial journalism, including at Bloomberg. She helps mission-driven organizations translate complex topics - like TNFD, CSRD, sustainable investing, and responsible AI - into clear, engaging content that drives real-world impact.

She has authored global case studies for the TNFD, created high-performing content for ESG platforms and Big 4 firms, and built a LinkedIn audience of 20,000+ by breaking down sustainability reporting for professionals worldwide. A certified GRI Sustainability Professional and holder of the CFA Certificate in ESG Investing, she combines technical fluency with sharp storytelling to bridge sustainability and business goals.

In this interview, she speaks with Jo Paisley to explore the evolving role of climate risk and sustainability in financial risk management.

 

Could you give us a little background on GARP?

 

GARP is the world's leading professional organization for risk managers. Our mission is to advance the profession through education, research and promotion of best practices.

Our main business is risk education, and we have two key products. One is the Financial Risk Manager (FRM®) Certification which is a master's level qualification in financial risk management. The second is our Sustainability and Climate Risk (SCR®) Certificate, which we launched five years ago. 

I joined GARP around 7 years ago to set up the GARP Risk Institute, which is our thought leadership arm. As I was given a blank canvas of areas to focus on, I looked for areas of risk management that we felt could benefit from further exploration to help the profession. We soon realised that climate risks and sustainability issues were critical areas to explore as they were new to many in the profession, and of course, they are potentially so impactful. 

These risks have also become much more of a focus for the regulatory community, with many supervisors around the world issuing formal expectations for climate risk management. The formation of the Network for Greening the Financial System (NGFS) has also been incredibly powerful. This so-called coalition of the willing, comprising central banks and supervisors from all around the world, exchanges best practices between members and spreads best practices. At GARP we could see that it was only a matter of time before many financial institutions would need to build capability in climate and nature risk management. 

The GARP Risk Institute has developed a range of educational offerings over the past seven years, which complement the SCR Certificate. These include webcasts, research and the Climate Risk Podcast Series. 

One of our most significant areas of research has been our global climate and nature risk management surveys, which we’ve now done for six years. In this, we score firms on their ‘maturity’ across a range of dimensions, such as their climate and nature risk governance, use of metrics, targets and limits and scenario analysis. We then benchmark the firms, which all remain anonymous, and provide them with detailed feedback on how well they score relative to their peers. This helps the firms understand how they can improve their own practices, and this in turn will raise the standards globally. 

For climate, we have seen a real improvement in capability. Data availability continues to be an issue, but even that is improving. For nature, it is still very early days. It is less advanced today than climate risk management was in 2019. But things are moving forward. We’ve also analysed how the leading firms in climate and nature risk management compare with others, which helps give us a sense of current best practice.

 

What made you decide to pursue sustainability?

 

When I joined GARP, I wasn't sure what we'd be looking at. We were asked to focus on areas in which risk managers may need more insight. 

At that point, I was already reading and thinking a lot about climate change. I read Mark Carney's famous speech in 2015 and also some books, like Doughnut Economics by Kate Raworth. I was thinking about where the economics profession may have gone wrong. 

I could see that climate was going to become a huge regulatory issue as well and the firms weren't prepared for it. That's what got me first started. And then it just sort of snowballed because there was so much going on. 

It's quite hard to keep up with it all, actually. And so, we decided that it would be better to focus on one or two areas and become more expert in those than try and spread ourselves too thinly. I also host a podcast every three weeks and that's been a lot of fun. I've had some terrific guests and I've learned a huge amount through those conversations. When I look back at some of the early ones, they're still highly relevant. 

The podcast was partly prompted by COVID. We knew we couldn't meet, and in-person conferences were stopped for quite a while. This was an alternative way of building a community and educating people.

 

What are the main trends in climate risk management that you are seeing?

 

We often scan the horizon for emerging areas, and in 2023 we highlighted biodiversity and nature as key areas to watch. Until recently even scientific research and policymaking had tended to look at climate change and biodiversity as distinct topics. Each issue has its own international convention, and each has an intergovernmental body that assesses available knowledge. But increasingly, there is now a view that climate change and environmental issues need to be tackled jointly because they are so highly interconnected. 

Firms and regulators are beginning to look beyond climate and are coming to realize how dependent our economies are on nature. This makes it more likely that – at the very least - there will be legal and reputational risks associated with activities that are destructive to nature. So financial firms need to be alert to the risks and opportunities facing the counterparties to whom they're lending to or underwriting. 

We wrote a white paper on biodiversity loss, which is a handy introductory guide for those new to this topic. It’s a fascinating and fast-moving area.

 

Any other trends you see besides that?

 

The reporting landscape has become incredibly complicated. Firms need to work on how to establish good quality reporting across potentially multiple regimes and frameworks. Of course, it’s a bit of chicken and egg for financial firms, as they need data from the ‘real’ economy to understand the risks that they are exposed to. 

Another trend we see is a shift from focusing only on risks to looking more at commercial opportunities. The transition to net zero may be happening faster than we realise. So financial firms can make money by investing in the right sectors while also supporting the transition. We see a huge amount of product innovation, for example, in the financial sector. That's very positive.

 

What kind of product innovation do you see in the financial sector?

 

There’s a handy chart in our Fourth Annual Global Survey of Climate Risk Management which shows the products that different types of firms are offering

There are things like green bonds and sustainability-linked loans, green asset finance and green home mortgages. Different types of firms offer different types of products. 

The question is are these products pricing the risks appropriately? Are they what they claim to be? There's a lot of scope for greenwashing, even unintentionally. New products bring new risks to the firms.

 

Could you elaborate more on the research findings of your global climate risk management surveys, including insights, data and references?

 

The surveys ran during a time when regulatory interest in climate risk management has grown from minimal to extensive. The 2019 survey described how firms had made a good start, but that there was a lot more work to do. The 2020 survey mapped out firms’ continuing journey, while the 2021 survey reported on the emergence of a growing sophistication across the firms and improvement in quantifying climate-related risks. The latest survey in 2022 confirmed this trend, but also highlighted the increase in regulatory scrutiny and formal expectations.

Some of our latest findings include:

·         Supervisory activity on climate risk has intensified. Nearly 90% of the firms’ regulators have published formal expectations for climate risk management, and nearly 80% are required to report their climate-related risks.

·         There has been a marked increase in the use of metrics, targets, and limits. Ninety percent of the firms now use metrics, around 75% use targets, and just over 50% use limits. Only 10% of the firms didn’t measure their climate risk at all, down from 25% the previous year.

·         Some green products have become commonplace. Over 80% of asset managers in the survey offered an ESG fund, and over 70% of banks offered green bonds and sustainability-linked loans.

·         More firms are undertaking climate-related assessments in their due diligence. Eighty-five percent of firms are assessing their counterparties’ exposure to transition risk, while 73% are assessing physical risks.

·         Risk staffing and training is on the rise. Over the previous two years, 67% of firms reported significant increases in staff working on climate risk, and firms expect to hire more staff in the coming two years. Ninety-five percent of firms offer training to multiple business areas, with more than 40% offering it to their entire staff.

 

Are you seeing a lot of demand for sustainability education now? Because I know there's a huge skills gap out there.

 

Yes, for sure. We’re seeing strong demand at the individual and institutional level. Professionals from a range of experiences, including risk, commercial banking, sustainable finance, investment management, consulting, corporate sustainability, engineering, supply chain, legal and compliance, and regulatory affairs are all finding the SCR knowledge valuable. 

Several global firms are putting whole cohorts of staff through the SCR program. Their goal is to create a common baseline of knowledge across their organization so that they can communicate with the same language and understanding of issues. That's very promising. And let's hope that continues. 

The SCR curriculum covers all the foundational areas of knowledge you should know about from climate science to climate risk measurement and scenario analysis. The program is not limited to those working in the financial sector. It does appeal to quite a lot of people working in the real economy.

 

How have your graduates made impact in their organizations? Could you maybe highlight some of the people who have the FRM or SCR and their case study?

 

Our graduates go on to apply their skills at a variety of prestigious organizations, in many different high-impact roles. 

Our FRM graduates tend to be focused in the financial services sector in risk management roles, but also in compliance, data, audit, technology and more, dealing with all financial risk types. 

Our SCR graduates are employed across a broader range of financial services, consultancies, corporates and utility companies, as well as multilateral organizations like the UN. 

All of our graduates come away equipped with all the skills and knowledge they need to succeed and progress their careers, but we also make sure our curricula are updated with the very latest topics and issues in risk management, like AI and changing regulatory environments.

 

How do you pick your topics for the podcast?

 

We're constantly thinking about what the big issues are out there. You just have to look in the news and you can see what regulations are coming up. It's almost like there are too many issues. The question is, how can I narrow it down? 

But sometimes it's just a book I've read and I think, oh that's so interesting, our audience would really like it. For example, I did an episode on soil because I had read a really interesting book, which had highlighted so many risks. It is not something that everybody in a bank is going to know about, so if I could help them understand this, that might make a difference. 

Other topics are much more mainstream. For example, we might talk about the latest COP or how to embed climate within your risk management. 

Once climate gets under your skin and once you realise what's at stake, it's quite hard to go back and forget about it. It does haunt you a little bit. 

But working in this area can also help us deal with our fears - as understanding deepens, action often follows. It's very hard to say no I don't want a greener, more sustainable future. It is just a matter of encouraging people to get informed and make better choices.

 

What are your future plans?

 

There’s a lot of appetite for more advanced educational content on climate and sustainability. In particular, we find that people want practical, hands-on experience with some of the tools and techniques that leading firms are using to manage their risk. So we’re partnering with some of these tool providers to create a suite of ‘Masterclasses,’ where our members can deepen their knowledge and spend some time learning how to use these tools.

We just launched our first self-paced Masterclass on natural catastrophe modelling, in partnership with Fathom, a flood risk intelligence provider. We’re developing more on a variety of other core climate risk topics as we speak.

We’re also continuing to develop our suite of ‘Scenario Games.’ These are powerful tools for getting people to think through realistic, complex dilemmas around climate and nature risk. Participants role-play as the board of a fictional multinational company and must navigate the types of challenges that real firms are facing now and in the future.

These offerings are all part of our commitment to providing best-in-class content that will help prepare risk professionals for the challenges ahead.

 

 

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