OSFI leads consultation on climate change
The Office of the Superintendent of Financial Institutions (OSFI) has launched a three-month consultation on risks arising from climate change that might affect the safety and soundness of federally regulated financial institutions (FRFIs) and federally regulated pension plans (FRPPs).
To lead the consultation, OSFI has published a discussion paper called Navigating Uncertainty in Climate Change: Promoting Preparedness and Resilience to Climate-Related Risks.
OSFI looking at different risks
Through the consultation OSFI is seeking to engage FRFIs, FRPPs and other interested stakeholders in a dialogue on climate-related risks. OSFI is interested in how FRFIs and FRPPs define, identify, measure and build resilience to climate–related risks. OSFI is also seeking feedback on how it can facilitate FRFIs' and FRPPs' preparedness for, and resilience to, these risks.
The input will guide the development of regulatory and supervisory approaches that meet OSFI's mandate of protecting depositors, policyholders and private pension plan beneficiaries while allowing institutions to compete and take risks.
"Climate-related risks are difficult to predict, but will affect most sectors of the economy sooner rather than later,” said Ben Gully, assistant superintendent, Regulation Sector. “The submissions received and the discussions that will occur will support effective climate risk management and contribute to the resilience of the Canadian financial sector."
Similar to regulators in other jurisdictions, OSFI categorizes climate-related risks that affect FRFIs and FRPPs as follows:
- Physical risk, which arises from a changing climate increasing the frequency and severity of wildfires, floods, wind events and rising sea levels, among other things.
- Transition risk, which stems from efforts to reduce greenhouse gas emissions.
- Liability risk, which relates to potential exposure to the risks associated with climate-related litigation.