The Australian Prudential Regulation Authority (APRA) published on Wednesday (Thursday GMT) results from its second climate risk self-assessment survey, revealing how financial institutions are managing climate-related financial risks.
All APRA-regulated banks, insurers and superannuation trustees were invited to participate in the survey, and according to the regulator, with more than half responding.
This year’s voluntary survey followed the governing body’s smaller 2022 assessment, with APRA claiming the results mostly met its expectations, but areas of climate risk maturity are still apparent, especially among smaller entities.
Progress was seen among larger entities, with many improving in climate risk maturity since the 2022 results, as larger banks showed improvements in climate risk maturity.
But insurers and superannuation trustees held steady following stronger governance and risk management, however, disclosure and setting metrics demonstrated the need for further improvement.
APRA Member Suzanne Smith said: “Climate change not only has wide-ranging impact on our planet but can also exacerbate existing vulnerabilities in Australian communities, such as poor land use planning or a lack of infrastructure resilience.”
“This contributes to increased risk in the financial system, that can reduce financial institutions’ ability to effectively provide key financial services.”
Smith said APRA is urging all regulated entities – regardless of size - to implement practices for managing climate risk amid rising stakeholder expectations.
APRA said it is committed to ensuring the institutions it regulates take a strategic and risk-based approach to managing climate-related risks in a proportionate manner and confirmed its 2024-25 Corporate Plan would increase its expectations for regulated entities to consider climate risks in their decision-making.