Climate change assessment bumped off APRA agenda

APRA has put its assessment of climate change-related risks to Australia’s financial sector on hold. Picture: AFP

An APRA program to assess the vulnerability of the financial sector to climate risk has officially been put on the backburner, as all regulators prioritise their COVID-19 responses.

The Australian Prudential Regulation Authority’s plan was to design the vulnerability assessment this year and roll it out in 2021, starting with the banks and spreading to other industries.

While the development of the program has been paused, the rollout is still likely to occur next year, with some kind of announcement likely before September 30.

Entities will be asked to estimate the physical impact of the changing climate, including weather events, on their balance sheets, along with the transition risks to a low-carbon economy.

The timing was meant to chime with similar efforts by offshore regulators, with the results to be analysed with the Reserve Bank and coordinated with the Australian Securities & Investments Commission through the Council of Financial Regulators.

Input would also come from the CSIRO and the Bureau of Meteorology.

The undertaking was high on the regulatory agenda, but everything pales compared to the coronavirus.

There was no mention of the program’s deferral in a CoFR release on Wednesday concerning its scheduled quarterly meeting on June 19.

While economic activity was beginning to recover in some sectors, the CoFR said the pandemic was likely to have “long-lasting” effects in Australia and overseas.

Council members, including the RBA, APRA, ASIC and the Treasury, also discussed support measures, including temporary loan repayment deferrals, which begin to unwind at the end of September.

APRA is negotiating with the banks to extend the loan deferrals in return for capital relief so repayment holidays are not treated as a period of arrears.

“Members agreed that financial institutions, regulators and governments will need to continue to show flexibility in order to support the objectives of economic recovery, resilience of financial institutions, and fair household and business outcomes,” the CoFR said in a statement.