Climate change and the global response to the threats it poses have the potential to significantly impact the safety and soundness of the Canadian financial system. With that in mind, the Office of the Superintendent of Financial Institutions (OSFI) has published Guideline B-15: Climate Risk Management, which sets out OSFI’s expectations for the management of climate-related risks.

The guideline is OSFI’s first prudential framework that is climate sensitive and recognizes the impact of climate change on managing risk in Canada’s financial system. Two chapters currently comprise the guideline: Governance and Financial Disclosures. OSFI intends to review and amend this Guideline as practices and standards evolve.

“The final version of Guideline B-15 balances the concerns of stakeholders in all regions of Canada and remains in line with the expectations of global and domestic investors who fund Canadian federally regulated financial institutions,” said Peter Routledge, superintendent at OSFI. “I would like to thank those who provided thousands of comments on the draft version of Guideline B-15 published last summer.”

The publication of Guideline B-15 follows one of the most extensive consultations in OSFI’s history. OSFI received over 4,300 submissions from a wide range of respondents, including Federally Regulated Financial Institutions (FRFIs). Four key themes characterized respondent feedback:

  • OSFI’s approach to climate-related risks;
  • OSFI’s expectations related to climate-related financial disclosures;
  • The importance of incorporating proportionality and materiality considerations into the guideline; and
  • The adequacy of climate-related capital and liquidity requirements.

OSFI’s responses to the feedback received can be found in the consultation summary.

The guideline will be effective fiscal year-end 2024 for Domestic Systemically Important Banks (DSIBs) and Internationally Active Insurance Groups (IAIGs) headquartered in Canada. For all other in-scope FRFIs, the Guideline will become effective at fiscal year-end 2025.

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OSFI will hold an information session on March 20 at 1:00 p.m. ET. FRFIs, industry associations, those that submitted responses during the consultation, and other interested stakeholders can register by March 16.

OSFI will continue to engage stakeholders in our climate risk management work by launching the Climate Risk Forum later this spring.

The (OSFI) is an independent agency of the Government of Canada, established in 1987, to protect depositors, policyholders, financial institution creditors and pension plan members, while allowing financial institutions to compete and take reasonable risks. OSFI supervises more than 400 federally regulated financial institutions and 1,200 pension plans to determine whether they are in sound financial condition and meeting their prudential requirements.

Featured image credit: istock.

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