(Australian Associated Press)
Australia’s banking regulator has told banks and insurers that climate change is a “material, foreseeable and actionable” risk it expects them to manage.
“Uncertainty over long-term impacts or policy direction is not an excuse for doing nothing,” said Australian Prudential Regulation Authority executive board member Geoff Summerhayes in a statement on Wednesday.
The financial risks of climate change include direct damage to assets because of rising temperatures, supply chain disruptions because of extreme weather events, transition risks related to regulatory policy, and the potential for litigation if boards and directors fail to take action, APRA said.
“There is a high degree of certainty that financial risks will materialise, and entities can mitigate the magnitude of the impacts of these risks through action in the short term,” it said in a briefing.
APRA said it surveyed 38 large banks, insurers and superannuation trustees last year to assess how they were responding to climate change, and found all except for some health and life insurers were taking steps to increase their understanding of the threat.
“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,” Mr Summerhayes said.
He added that APRA’s views on the economic risk of climate change were consistent with those of regulators around the world.