Guidelines to bolster transparency in Canada’s financial institutions’ disclosures that are related to climate risks scheduled to take effect beginning from next year have been released by Canadian banking regulator on Tuesday .
This is coming after Canada last year had said banks and insurance companies would need to be more open about their climate-related risks and exposure beginning 2024 and improve transparency while disclosing such risks.
The two-chapter framework, which will apply to domestic banks and internationally active insurance groups headquartered in Canada, effective the end of the 2024 fiscal year was issued by the Office of the Superintendent of Financial Institutions (OSFI).
The rules for other federally regulated financial institutions will become effective at the end of the fiscal year 2025.
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With these new guidelines, banks must be prepared to maintain operations during climate-related disasters, include the impact of climate change on its liquidity risk profile, tie executive compensation with dealing with such risks, among other requirements, albeit the regulator did not lay out any specific increases in capital buffers and said the onus was for institutions to self assess within their internal capital.
The framework which calls for disclosure on governance, strategy and risk management, and metrics relating to financial institutions’ greenhouse-gas emissions was first drafted in 2022.
OSFI said federally regulated financial institutions were among the over 4,300 submissions received from a wide range of respondents, for changes to be made in its draft.
It has earmarked some disclosure expectations to be updated after the International Sustainability Standard Board issues its final standards by the end of June.
Story was adapted from Reuters.
