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Speaking before the Committee for the Economic Development of Australia on Wednesday, Australian Prudential Regulation Authority (APRA) chair Wayne Byres said the “unprecedented” risks posed by climate change are “increasingly very real, and immediate.”
The insurance sector is already keenly aware of climate change’s financial impact, Byres said, given the increasing severity of bushfires, flooding and cyclones in populated areas.
But Byres reiterated that further work is required to fully assess how climate change could wreak havoc on the nation’s business community.
Beyond the immediate risks posed by extreme climate variations, APRA has called for a renewed focus on climate-sensitive assets.
Drastic swings in government policy, precedents set by successful climate-based litigation, and shifting community attitudes could cause further havoc.
Byres used the speech to highlight APRA’s new pilot climate vulnerability assessment, which it hopes will help the regulator, and Australia’s big five banks, gain a clearer understanding of those risks.
“Our goal is to better identify and measure the links between climate science and financial risk within the context of existing industry risk assessment frameworks,” he said.
“Without this linkage, climate-related financial risk cannot be effectively considered nor managed by the Australian financial sector.”
The results of that pilot program are likely to be gathered later this year, Byres said.
APRA is hardly the first entity to sound the alarm on climate change and how it threatens Australian businesses.
Deloitte analysis from November 2020 states insufficient action could lead to $3.4 trillion in losses to Australia’s economy by 2070, and with it 880,000 job losses.
It is not all doom and gloom, however.
Byres said APRA’s draft prudential practice guide, revealed last Thursday, will also tune Australia’s business community into the “opportunities that a changing climate will generate, as new investment is needed, new technologies emerge, and economies and new businesses grow.”
In his address, Byres also said damaging cultural issues in the financial services industry and the threat of cyber attacks remain key concerns for APRA through 2021.
Even so, it appears APRA believes the heat is on.
“To sum up, our work on climate risks reflects our preventative, prudential role,” Byres added.
“Financial institutions exist to take risks, and our role is to make sure those risks – from whatever source – are identified, measured, monitored and (most importantly) managed.
“Climate risks pose some unique challenges, but the broad objectives for APRA are no different.”
Links
- As world leaders unveil strong plans to halve carbon emissions by 2030, Scott Morrison says Australia will stick to a 28% target
- Climate activist Greta Thunberg tells Congress 'subsidizing fossil fuel' companies is a 'disgrace'
- Climate scientists debunk 13 myths about global warming
- Exxon, BP, and Shell fall after New York City sues the major oil companies for misrepresenting their role in climate change
- The Morrison government has pledged $565.8 million for clean tech, as the Biden administration criticises Australia's climate action as 'insufficient'
- The founder of the World Economic Forum explains why 'a new mindset' is giving him hope for climate action, and shares which companies are getting it right
- Customers expect CEOs to take action against climate change now more than ever, Unilever executive says
- A climate justice activist warns of 'climate apartheid' if big companies ignore grassroots ideas
- Art can serve as a 'bridge' that connects climate change with action, artistic director says
- Companies ignoring climate change will be on the 'wrong side of history,' says World Economic Forum executive chairman
- Biden pledges to halve US greenhouse gas emissions by 2030
- AOC, Bernie Sanders want to help 2 million Americans by investing in green housing infrastructure
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