March 20, 2019

APRA published an information paper that presents the results of its first climate risk survey on regulated entities. The paper takes stock of actions and initiatives underway in Australia and internationally in response to the growing awareness of physical, transitional, and liability risks of climate change. APRA also announced that it will increase its scrutiny of how banks, insurers, and superannuation trustees are managing the financial risks of climate change to their businesses.

APRA surveyed 38 large banks, insurers, and superannuation trustees, last year, to assess their views and practices on climate-related financial risks. The survey found that a substantial majority of the regulated entities were taking steps to increase their understanding of the climate change risk. Other key findings include the following:

  • A third of the respondents believed that climate change is a material financial risk to their businesses and a further half thought it would be in future.
  • Majority of the banks considered climate-related financial risks as part of their risk management frameworks.
  • Reputational damage, flooding, regulatory changes, and cyclones were nominated as the top climate-related financial risks.

Respondents also described the strategic opportunities they had identified from the transition to a low-carbon economy, including developing innovative products and services, and meeting the growing demand for green investment opportunities.

 

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Keywords: Asia Pacific, Australia, Banking, Insurance, Pension Funds, Climate Risk Survey, Risk Management, Climate-Related Financial Risk, APRA

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