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Releasing the results of its first climate risk survey of regulated entities today, the Australian Prudential Regulation Authority (APRA)called on entities to move from gaining awareness of the risks to taking action to mitigate against them.

APRA surveyed 38 large banks, insurers and superannuation trustees last year to assess their views and practices related to climate-related financial risks. The survey found a substantial majority of regulated entities were taking steps to increase their understanding of the threat, including all of the banks, general insurers and superannuation trustees surveyed.

Other key findings were:  

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

APRA Executive Board Member Geoff Summerhayes said APRA had a responsibility to ensure financial institutions were alert to issues that could impact their ability to fulfil promises to customers.

“Gaining an understanding of the risks is an important first step for entities, but APRA wants to see continuous improvement in how organisations disclose and manage these risks over coming years.”

“APRA’s views on the economic risks of climate change, recently echoed by the Reserve Bank of Australia, are consistent with those of financial regulators internationally. These risks are material, foreseeable and actionable now. Uncertainty over long-term impacts or policy direction is not an excuse for doing nothing,” said Mr Summerhayes, who is also Chair of UN Environment’s Sustainable Insurance Forum.

Read the survey white paper, ‘Climate change: Awareness to action’ (PDF).

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