Canada Introduces Norms to Reduce Financial Risks from Climate Change
As the country's financial institutions prepare for obligatory disclosures beginning in 2024, a Canadian financial regulator unveiled draft guidelines on Thursday to limit the risks of climate change.
For periods beginning October 2023, the Office of the Superintendent of Financial Institutions (OSFI) has released guidelines that require yearly climate-related disclosures on governance, strategy, risk management, metrics and targets, and greenhouse gas emissions, as well as a transition plan.
Firms must also implement policies and processes to manage climate risks and price climate-risk-sensitive assets and liabilities. However, they do not yet include any modifications to capital requirements to offset these risks, and officials said OSFI would communicate more about this after commenting on the guidelines.
An OSFI official said, "We believe that these disclosures are going to incentivize improvements in the quality of our institutions’ governance and risk management practices."
He went on to say that the regulator will gradually impose more qualitative and quantitative expectations, with the latter including mandates for select significant institutions to disclose indirect and direct emissions, known as scope 1, 2, and 3 emissions.
Canada, the world's fourth-largest oil producer, has pledged to be carbon-neutral by 2050. In January, Canada's central bank and the Office of the Superintendent of Financial Institutions (OSFI) warned that the country's plan to transition to low-carbon alternatives poses significant risks to some sectors and that delaying preparations could expose financial institutions and investors to "sudden and large losses."
Greenpeace Canada spokesperson Alex Speers-Roesch said:
"The guidelines do not specifically require that (firms’ transition plans) be 1.5-degrees Celsius aligned. This is a major shortcoming of the guidelines overall.”
The final version of the guidelines will be ready by 2023.
Source: The Indian Express
