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APRA reprioritises around climate risk guidelines

By Fergus Halliday
 — 1 minute read

APRA has juggled its priorities in response to COVID-19, but its guidelines on managing the risks of climate change are still on the cards.

The Australian Prudential Regulation Authority (APRA) has issued an update to the financial sector, outlining the regulator’s priorities for the final quarter of 2021.

The list of priorities includes a variety of items, ranging from updating capital adequacy and superannuation standards to consultations with the insurance and financial planning sectors.

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However, the most pertinent inclusion here is likely to be the release of APRA’s final guidelines on how the financial sector should manage the financial risks of climate change.

Issued earlier this year, APRA’s draft guidelines called on banks, insurers and super funds to adopt new frameworks when it comes to calculating, monitoring and disclosing climate-related risks to investors.

Citing the uniquely long-term threat of climate change, APRA chair Wayne Byres emphasised the importance of developing robust processes for measuring that risk sooner rather than later. 

“The prudential practice guide doesn’t direct or prevent APRA-regulated entities making any particular business or investment decision. Rather, it 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,” he said in April 2021.

APRA’s new list of priorities comes following industry feedback and consultation on the regulator’s annual update in February 2021.

“In response to industry feedback on specific policy consultations and in light of COVID-19, APRA has reprioritised the policy agenda for the remainder of the year,” APRA executive director for policy and advice Renée Roberts explained.

As part of the reprioritisation, a number of policy efforts originally scheduled for the 2021 calendar year have been deferred to 2022.

This includes standards for operational resilience, new remuneration disclosure requirements, plus reforms around interest rate risk in the banking sector and offshore reinsurance.

While APRA’s latest roadmap for policy priorities ends in December, the regulator said that it will publish a “full update” in early 2022.

“This reprioritisation is intended to enable APRA-regulated entities to focus on implementing key policy reforms, as well as managing the impacts of COVID-19,” Ms Roberts said.

 

APRA reprioritises around climate risk guidelines
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