The Office of the Superintendent of Financial Institutions (OSFI) has recently released Guideline B-15: Climate Risk Management, which establishes a framework for overseeing and managing climate-related risks to the Canadian financial system. The Guideline outlines OSFI’s expectations from institutions operating in banking, insurance, and pension plans when assessing, managing and disclosing climate-related risks.
The OSFI has developed its first climate-sensitive prudential framework, acknowledging the potential effects of climate change on risk management in Canada’s financial services industry. This guidance currently consists of two sections: Governance and Financial Disclosures. As practices and standards evolve, OSFI intends to update and refine the Guideline with new information. This climate-sensitive approach to risk management is designed to ensure that financial institutions are better equipped to identify, assess, manage, monitor, and disclose their risks related to physical, transitional, and liability aspects of climate change.
OSFI recently completed one of the broadest consultations to compile Guideline B-15. Feedback from 4,300 participants such as Federally Regulated Financial Institutions (FRFIs) was analyzed in depth, and four major topics emerged from the respondent comments:
- OSFI’s approach to climate-related risks;
- OSFI’s expectations related to climate-related financial disclosures;
- The importance of incorporating proportionality and materiality considerations into the Guidelines; and
- The adequacy of climate-related capital and liquidity requirements.
The Guideline will be in effect for Domestic Systemically Important Banks (DSIBs) and Internationally Active Insurance Groups (IAIGs) headquartered in Canada as of the fiscal year-end 2024. For all other Financial Services Regulatory Framework Institutions (FRFIs) within the scope of the Guideline, it shall become effective at fiscal year-end 2025.
resource: https://esgnews.com/canada-issues-final-guidelines-for-banks-on-climate-risk-management/