Ottawa, ON (May 26, 2022) – Today, the Office of the Superintendent of Financial Institutions (OSFI) issued a draft version of Guideline B-15: Climate Risk Management. This guideline proposes a prudential framework that is more climate sensitive and recognizes the impact of climate change on managing risk. The draft Guideline sets the stage for OSFI’s expectations of federally regulated financial institutions.
Climate-related risks, including physical and transition risks, could have significant impacts on the safety and soundness of financial institutions, and the broader Canadian financial system. Building financial resilience against intensifying climate-related risks requires institutions to address vulnerabilities in their business model, their overall operations, and ultimately on their balance sheet.
OSFI is also introducing mandatory climate-related financial disclosures aligned with the international Task Force on Climate-related Financial Disclosures (TCFD) framework. These disclosures will incentivize improvements in the quality of the institutions’ governance and risk management practices related to climate. In doing so, this contributes to public confidence in the Canadian financial system by increasing transparency. This also aligns with a commitment made by the federal government to require financial institutions to publish climate disclosures starting in 2024.
Given the pace of change in climate risk management, OSFI intends to review and amend this Guideline as practices evolve and standards harmonize. OSFI welcomes public comments to draft Guideline B-15 before August 19, 2022.
“Ensuring that the financial system remains resilient in the face of climate change demands that we address its threats with a greater sense of urgency, vigour and effort,” said Peter Routledge, Superintendent. “With the release of this draft Guideline, we are taking deliberate steps towards addressing climate-related risks in our broader regulatory and supervisory activities.”
- Most federally regulated financial institutions are generally in the early stages of building climate-related risk assessment capabilities.
- This draft guideline incorporates stakeholder feedback on the 2021 discussion paper Navigating Uncertainty in Climate Change. It also considers the results from the 2022 Bank of Canada-OSFI report entitled Using Scenario Analysis to Assess Climate Transition Risk.
- OSFI plans to issue the final version of this guideline by early 2023, along with a non-attributed summary of comments received.
- Risk related to climate change is one of the areas of risk that OSFI highlighted in OSFI’s Annual Risk Outlook.
The Office of the Superintendent of Financial Institutions (OSFI) is an independent agency of the Government of Canada, established in 1987, to protect depositors, policyholders, financial institution creditors and pension plan members, while allowing financial institutions to compete and take reasonable risks. OSFI supervises more than 400 federally regulated financial institutions and 1,200 pension plans to determine whether they are in sound financial condition and meeting their prudential requirements.
Source: Office of the Superintendent of Financial Institutions (OSFI)Tags: climate change, OSFI, social responsibility