The Office of The Supervisor Of Financial Institutions (“OSFI”), Canada’s regulator of financial institutions and federally regulated pension plans, has launched a consultation on climate related risks in the financial sector. OSFI identifies climate risk as potentially impacting the safety and soundness of federally regulated institutions and pensions. OSFI sees severe climate events increasingly driving financial risks such as credit, market, liquidity and insurance risks. A discussion paper “Navigating Uncertainty in Climate Change: Promoting Preparedness and Resilience to Climate-Related Risks” seeks feedback on: how to build resilience to climate-related risks; how OSFI can facilitate preparedness for these risks and; what regulatory and supervisory approaches should be implemented by OSFI to protect depositors, policy holders and private pension plan beneficiaries.
OSFI has identified three categories of climate risk: physical risk from severity of weather (e.g. wildfires, floods, sea level, wind events etc.), transition risk as the economy shifts towards a lower green house gas footprint and liability risk related to potential exposure to the risks associated with climate related litigation. To promote preparedness and resilience to climate-related risks, OSFI is examining the role of capital requirements (is the existing capital framework adequate given these risks?); should climate related risks be added into existing risk related supervisory reviews; should climate related financial disclosures be required to support prudential oversight?
For more information, please contact:
Barry Campbell: barry@campbellstrategies.com
