The Australian Prudential Regulation Authority is also known as the APRA has recently released a draft of their climate change guidance.
This guidance is directed towards the banking, insurance and superannuation industries for managing the risks of climate change. This release came in response to industry requests for clarification on expectations.
The guide includes APRA’s best practices in areas such as governance, risk management, scenario analysis and disclosure. It does not however implement additional requirements or obligations.
APRA has developed their draft CPG 229 in response to industry requests including clarity of regulatory expectations and their view of sound practice.
Since Australia became a party to the Paris Agreement, Chairman Wayne Byres has been consistently raising awareness around the topic of climate-related risks to the financial sector.
Whilst the guide draft from the Prudential Regulation Authority, APRA, doesn’t create any new requirements in regards to financial risks CPG 229.
According to Byres “The guide is aimed at ensuring decisions are well-informed and appropriately consider both the risks and opportunities that the transition to a low carbon economy creates.”
Recommendations from the Financial Stability Board’s Task Force on Climate-related Financial Disclosures, TCDF, influenced the CPG 229. With both domestic and international peer regulators assisting with the process.
The APRA is actively seeking feedback for the CPG 229, Climate Change Financial Risks, draft and plans to release their final version prior to the end of the year.
The intended outcome of the CPG 229 is providing greater clarity of regulatory industry practice in regards to climate change financial risks.
This clarity has the potential to lead to an increased size customer base and business strategy enhancements for relevant industries such as insurance, banking and superannuation.
APRA – https://www.apra.gov.au/news-and-publications/apra-releases-guidance-on-managing-financial-risks-of-climate-change
Insurance News – https://www.insurancenews.com.au/regulatory-government/apra-releases-draft-climate-change-guidance