A Canadian financial regulator has released draft guidelines intended to mitigate the risks of climate change.
This is even as the country’s financial institutions prepare for mandatory disclosures starting in 2024.
Recall that Canada, which is the world’s fourth-largest oil producer, has committed to achieving net-zero emissions by 2050. The country’s central bank had said in January that Canada’s plan to transition to low-carbon alternatives poses important risks for some sectors, and delaying actions to prepare could expose financial institutions and investors to “sudden and large losses.”
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The guidelines, which were issued by the Office of the Superintendent of Financial Institutions (OSFI), call for annual climate-related disclosures on governance, strategy, risk management, metrics and targets, and greenhouse gas emissions, as well as a transition plan, for periods starting October 2023.
The guidelines also require firms to put policies and practices to manage climate risks and adequately price climate risk-sensitive assets and liabilities in place.
However, they do not include any capital requirement changes to mitigate these risks, and OSFI will communicate more on this after consultation on the guidelines, according to reports.
Speaking of the guidelines, an OSFI official said “We really believe that these disclosures are going to incentivize improvements in the quality of our institutions’ governance and risk management practices,”.
He noted that the regulator will slowly introduce further qualitative and quantitative expectations, with the latter including requirements for disclosure of indirect and direct emissions, known as scope 1, 2, and 3 emissions, for some major institutions.
In his reaction, Greenpeace Canada spokesperson Alex Speers-Roesch said the guidelines don’t “specifically require that (firms’ transition plans) be 1.5-degrees celsius aligned,”. He was referring to the need to limit global warming to 1.5 degrees Celsius.
Story was adapted from the Indian Express.