the times | Thursday January 13 2022 43
Business
Banks and insurers operating in Britain
must act urgently to address the risks
posed by a warming climate, the Bank
of England has warned.
Many financial institutions are
focused on the “business opportunities
presented by climate change”, accord-
ing to officials from the Bank’s Pru-
dential Regulation Authority, who
reminded firms “that climate change
also presents an increasing business
risk that is foreseeable and demands
action now”.
Supervision of climate-related finan-
cial risks will be incorporated into the
PRA’s “core supervisory approach”
from this year, meaning that institu-
tions will be subject to closer scrutiny
and engagement in this area. Firms
that take insufficient action may face
intervention from the regulator.
The warning was issued in a series of
“Dear CEO” letters, sent to institutions
that the watchdog regulates and pub-
lished yesterday, setting out its priori-
ties for them for the coming year. The
three letters to British banks, insurers
and international banks operating in
Britain contain near-identical sections
emphasising the need to act.
“Climate change presents a material
and increasing financial risk to firms
and to the financial system. Managing
the risks to firms’ safety and soundness
from climate change requires action
now, and remains a key PRA priority,”
officials wrote.
In 2019, the authority set out its
expectations for how Brit-
ish banks and insurers
should manage cli-
mate-related finan-
cial risks, high-
lighting the need
to address both
transition and
physical risks.
The former in-
clude changes in
the value of assets
and liabilities as the
world shifts to a low-
carbon economy withAct on climate risk
urgently, Bank tells
the financial sector
the introduction of carbon taxes,
radical changes in transportation and
potential legal liabilities from climate-
related lawsuits. Physical risks include
extreme weather events and chronic
shifts in climate patterns that could
damage assets, disrupt businesses and
affect people’s health and incomes.
The authority said at the time that it
expected to see board-level engage-
ment in addressing such risks and for
firms to allocate responsibility to
senior management. It asked busi-
nesses to identify risks.
In its letters yesterday, officials said
that “some firms have made good
progress in embedding the PRA’s
supervisory expectations... but
progress has not been consistent across
all firms, with further work required by
many to meet those expectations.
“We expect firms to take a forward-
looking, strategic and ambitious
approach to managing climate-related
financial risks. This approach should be
proportionate to the scale of the risks
and the complexity of a firm’s opera-
tions.”
The regulator would “pay particular
attention to how firms quantify cli-
mate-related risks and incorporate
those risks into business strategies,
decision-making and risk-taking” and
would “keep a range of supervisory
tools under review for use where we
deem progress to be insufficient”.
The letter to insurers added that
“there could also be benefits from
insurers conducting further research
on emerging climate-related financial
risks”, such as “the potential impact
of litigation risk on their bal-
ance sheets and the impact of
physical risks on assets and
liabilities”.
In its letter to inter-
national banks operat-
ing in Britain, the PRA
said climate change was
a “vital element of sound
risk management”.Emily Gosdenhow Brit
urers
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a
risBlow for Johnson Matthey
workers as it shuts plants
Hundreds of high-value British tech-
nology jobs are set to go as the cost of
Johnson Matthey’s controversial exit
from the race to develop electric vehicle
batteries rises to nearly £500 million.
In the autumn, the FTSE 100 science
group decided to abandon years of
research and development costing
hundreds of millions of pounds and to
sell its proprietary technology designed
to help to produce long-range plug-in
electric battery cars.
However, in a cut-throat market
dominated by giants from China, South
Korea and Japan, it has now admitted
that it has found no buyer. Johnson
Matthey has decided to close the
business, which in Britain employs 400
people in research and testing facilities
in Durham, Hertfordshire and
Oxfordshire.
Having already taken a £340 million
charge in its accounts, Johnson Matt-hey admitted that the “settlement of
contractual liabilities, redundancy, clo-
sure and abandonment costs” would
lose it an additional £150 million. The
news sent shares in the £4 billion com-
pany down 77½p, or 3.8 per cent, to
£19.63½ — close to a seven-year low,
discounting the Covid market crash.
The U-turn created shockwaves in
British industry, which has been trying
to position itself as a leader in green
technologies. In a previous statement
on the ditching of its electric-lithium
nickel oxide technology, Johnson
Matthey said: “While the testing of our
eLNO battery materials with custom-
ers is going well, the marketplace is rap-
idly evolving, with increasing commod-
itisation and lower returns.”
It added that with decision-time
arriving on further big investments in
gigafactories in Europe, “it has become
clear that our capital intensity is too
high compared with other more estab-
lished, large-scale, low-cost producers”.Robert Lea Industrial EditorDAZN close to $800m deal for BT Sport
A fast-growing global sports streaming
service is close to a deal to acquire BT
Sport in an estimated $800 million
transaction that will give it access to
English Premier League and Uefa
Champions League football matches.
An agreement with DAZN could be
reached as soon as this month, after
protracted talks that became public last
autumn. The deal has yet to be finalised
and could still fall apart, according to
reports last night.
BT and DAZN declined to comment,
as did Discovery, which emerged as a
rival bidder in December when discus-
sions between the two stalled. The
American media company, which owns
Eurosport, the pan-European sports
network, offered to form a joint venture
with BT, something that the telecoms
company was considering as an alter-
native to a sale. The Sunday Telegraph
first reported the joint-venture talks.
Discovery is still in discussions, al-
though DAZN is viewed as the leading
contender, according to two sources.
The streaming service, which was
created in 2016, is owned by Sir
Leonard Blavatnik, 64, the Ukraine-
born billionaire. DAZN now has 11 mil-
lion subscribers, while BT Sport has
five million viewing households in
total, according to Enders Analysis.
BT Group, the former state-owned
telecoms company, launched BT Sportin 2013 with a £1.5 billion charge into
sports television. It recruited Jake
Humphrey and Clare Balding, the pre-
senters, while buying rights to thirty-
nine live Premier League matches over
three seasons. In November 2013, BT
outbid Sky and ITV with a £900 million
cheque for exclusive rights to
Champions League and Europa League
football.
A key obstacle in the present talks issaid to have involved securing agree-
ments with rights-holders as well as
with Comcast, Sky and Virgin Media,
which distribute BT Sport’s program-
ming in the Republic of Ireland and the
UK.
Acquiring BT Sport would expand
DAZN’s reach in Britain and Ireland,
although its global expansion strategy
has come at a cost. In 2019, the most
recent year for which information is
available, DAZN reported an after-tax
loss of $2.15 billion, which it attributed
to continuing investment in its
platform and the introduction of the
service in new markets in Spain and
Brazil. About $1.7 billion of the spend-
ing was to acquire sports rights, accord-
ing to UK regulatory filings.
Live sporting events continue to
attract large audiences, and pay-TV
providers and streaming services are
willing to pay a premium to carry
games. In the United States, the
National Football League signed rights
deals with CBS, NBC, Fox, ESPN and
Amazon collectively worth $100 billion
over the next 11 years.Robert Miller
city-dwellers to head out into the
countryside in search of more space
and according to Savills demand for
multimillion-pound rural homes
remains strong. However, the estate
agency also has noted that rich
buyers are returning to the London
market as offices and hospitality
have begun to get back to normal.
“The activity in prime residential
has been strong in the country and
in the second half of 2021 we saw
the London prime market start to
recover quite fast — significantly so
in the last quarter,” Mark Ridley,
chief executive of Savills, said.
Founded in 1855, Savills employs
40,000 people in its 600 offices in 71
countries. It is best known for itsresidential estate agency business,
but it also has a property
management division, an investment
management unit and advises on
commercial property deals.
The commercial side of the
business has been busier of late,
despite subdued demand for office
leases. With overseas investors now
able to travel more freely, Savills
reported an “unwinding of
pandemic-driven delays”, with
money that would have been
invested earlier now being spent.
Ridley said that the cash was
coming from investors from Europe
and America, while Singaporean
funds were actively looking to park
their money in UK property — inwarehouses and laboratory spaces
in particular, two sectors that have
weathered the pandemic better
than most.
Investors are looking again at
retail properties, values of which
were tumbling even before
repeated lockdowns. “Some parts
of retail are coming back,” Ridley
said. “Retail warehousing is back
in vogue. We are also seeing an
improvement in shopping centres
... with the right criteria.”
City analysts had pencilled in a
pre-tax profit of about £160 million
for 2021. They now think it will be
abov e £190 million.
Shares in Savills rose 105p, or
8 per cent, to £14.25.This grade II listed,
five-bedroom
country house in
Little Hadham,
Hertfordshire, is for
sale for £2.95 millionThe Bank of England said
that some firms have not
made enough progress$2.15bn
After-tax loss for DAZN
Source: Times research