How are Australian financial sector organizations carrying out climate risk management?
- Published: Friday, 05 August 2022 09:21
The Australian Prudential Regulation Authority (APRA) has published the findings of its latest climate risk self-assessment survey conducted across the banking, insurance and superannuation industries. The voluntary survey, issued in March this year, was designed to provide insights into how APRA-regulated entities are aligning their practices with the expectations set out in Prudential Practice Guide CPG 229 Climate Change Financial Risks.
The responses to the survey from 64 medium to large institutions, suggest APRA-regulated entities are generally aligning well to APRA’s guidance, especially in the areas of governance and disclosure. Climate risk, however, remains an emerging discipline compared to other traditional risk areas, with only a small portion of survey respondents indicating that they have fully embedded climate risk across their risk management framework.
Other key findings from the survey include:
- Four out of five boards oversee climate risk on a regular basis, while just under two-thirds of institutions (63 percent) have incorporated climate risk into their strategic planning process;
- Almost 40 percent of institutions said climate-related events could have a material or moderate impact on their direct operations;
- Nearly three-quarters of institutions (73 percent) said they had one or more climate-related targets in place, however 23 percent of institutions do not have any metrics to measure and monitor climate risks; and
- Over two-thirds of institutions (68 percent) said they have publicly disclosed their approach to measuring and managing climate risks, with 90 percent of those aligning their disclosure to the Taskforce for Climate-related Financial Disclosures (TCFD) framework.