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Climate change risk in banking, insurance and superannuation


The passage of the Climate Change Bill by the House of Representatives adds to the climate risk management expectations in banking, insurance and superannuation.

The Bill specifies the 2030 and 2050 greenhouse gas emissions reduction targets and requires an annual climate change statement to be tabled and delivered in Parliament.

While the Bill, which will be reviewed by a Senate inquiry before expected passage by the Senate in September, does not impose direct obligations on APRA-regulated entities, the Climate Change Authority established by the Bill to advise on future greenhouse gas emission reduction targets must ensure that any measures to respond to climate change should:
a. be economically efficient; and
b. be environmentally effective; and
c. be equitable; and
d. be in the public interest; and
e. take account of the impact on households, business, workers and communities; and
f. support the development of an effective global response to climate change; and
g. be consistent with Australia’s foreign policy and trade objectives.

Climate change is creating financial risks for banks, insurers and superannuation trustees, whether it be the physical damage from floods or bushfires, or asset price volatility as consumer and investor demands evolve as there is a transition to lower emissions.

APRA climate risk survey report

The Australian Prudential Regulation Authority (APRA) has published the findings of its latest climate risk self-assessment survey conducted across the banking, insurance and superannuation industries.

The report provides insights into how APRA-regulated entities align their practices with the expectations set out in Prudential Practice Guide CPG 229 Climate Change Financial Risks.

The report concludes that climate risk management is an emerging discipline compared to other traditional risk areas, with only a small portion of survey respondents indicating that they have fully embedded climate risk across their risk management framework. 

An area for improvement is metrics and targets.

AICD director duty opinion

The Australian Institute of Company Directors has published counsels’ advice that under Australian law, directors have the latitude to take into account climate-related and broader stakeholder interests when discharging their best interests duty. Further, they should do so where it is necessary to protect their organisation’s reputation and/or ensure its long-term sustainability. The AICD has also published a practice note for directors.

ACSI report

The Australian Council of Superannuation Investors (ACSI) has published its “Promises, pathways & performance – Climate change disclosure in the ASX200” report.

To assess climate risk, investors require sufficiently granular climate-related disclosure to understand their investment exposure and consider the impacts of transition and physical risks.

The report provides an overview of the current state of climate-related disclosures in ASX200 companies.

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David Jacobson

Author: David Jacobson
Principal, Bright Corporate Law
Email: djacobson@brightlaw.com.au
About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.

The post Climate change risk in banking, insurance and superannuation appeared first on Bright Law.


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