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Big banks join forces on climate risk

Lachlan Maddock
— 1 minute read

Australia’s largest financial institutions have joined forces to develop key climate risk modelling standards.

NAB, Westpac, CBA have come together with a number of other institutions and leading scientists and researchers to develop standards for climate physical risk projections – the “Climate Measurement Standards Initiative” (CSMI).

“For the first time, leading Australian experts in both physical climate change science and disaster modelling are working together with Australian financial institutions to provide a scientifically robust, common standard for industry disclosure and reporting of climate-related financial risks in Australia,” said EIT Climate-KIC CEO Christopher Lee.

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“This will provide companies and regulators with a common understanding of the science and how model-based projections of climate variables can be integrated into physical risk scenario analysis.”

The CSMI will provide projections for future repair and replacement costs of residential and commercial buildings and infrastructure, and will be led by scientists from the CSIRO Climate Science Centre and Bureau of Meteorology.

“A common Australian standard for performing physical climate scenario analyses will help provide investors and other users of climate-related disclosures with an improved level of comparability and an understanding of the scientific uncertainty in the data used as a basis for their climate-related disclosures, in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD),” Mr Lee said. 

Other funders and supporters include QBE, IAG, Suncorp, HSBC, and MinterEllison. 

APRA has previously warned that it will be keeping a close eye on the big banks to make sure they’re doing their part to combat climate risks to the financial sector. 

“Beginning with the ADI industry will provide helpful insights on the impact of a changing climate on the broader economy, which will be analysed in conjunction with the Reserve Bank of Australia,” the regulator said in a letter to industry. “The vulnerability assessment will involve entities estimating the potential physical impacts of a changing climate, including extreme weather events, on their balance sheet, as well as the risks that may arise from the global transition to a low-carbon economy.”

 

Big banks join forces on climate risk
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