Banks, insurers and superannuation trustees need to do more than talk the talk where climate change is concerned, with the Australian Prudential Regulation Authority (APRA) urging them to also walk the walk and act to mitigate risks to their customers.
While APRA found that many entities were increasing their understanding of the threat of climate change, it said more needed to be done to improve how organisations disclose and manage these risks in coming years.
“APRA’s views on the economic risks of climate change, recently echoed by the Reserve Bank of Australia, are consistent with those of financial regulators internationally,” APRA executive board member and chair of the United Nations Environment’s Sustainable Insurance Forum, Geoff Summerhayes, said.
“These risks are material, foreseeable and actionable now. Uncertainty over long-term impacts or policy direction is not an excuse for doing nothing.”
A survey by the regulator of 38 large banks, insurers and super trustees found that a third believed that climate change was a material risk of their business now, with a further half thinking that it would be in the future.
Respondents nominated reputational damage, flooding, regulatory changes and cyclones as the top climate-related financial risks, with most banks already considering such risks as part of their risk management frameworks.
The outlook wasn’t all bleak however, with respondents also identifying strategic opportunities in transitioning to a low carbon economy, such as developing innovative products and services and meeting the growing demand for green investment options.
Super funds had a “tremendous month” in November, according to new data.
Australia faces a decade of deficits, with the sum of deficits over the next four years expected to overshoot forecasts by $21.8 billion.
APRA has raised an alarm about gaps in how superannuation trustees are managing the risks associated with unlisted assets, after releasing the findings of its latest review.
Compared to how funds were allocated to March this year, industry super funds have slightly decreased their allocation to infrastructure in the six months to September – dropping from 11 per cent to 10.6 per cent, according to the latest APRA data.