APRA outlines green risk
One of Australia’s main finance regulators has given companies a gentle nudge on climate change risk.
Banking regulator APRA has issued draft guidance to the finance sector that warns of “unprecedented” and “far-reaching” impact of climate risks.
APRA's Chair Wayne Byres claims the regulator wants Australia's big financial institutions to take the risks seriously.
“From our perspective the biggest risk for financial institutions is simply being caught unawares by the changes that are happening,” he told the ABC.
“The climate is changing, government policies around the world are changing, that's impacting economies and industries that are changing, investor expectations are changing, and in some cases all of that change is happening quite quickly.”
However, APRA's draft prudential practice guide does not direct or prevent organisations from generating more emissions, or funding projects that will.
“It's not telling them what to do, who to lend to, who to invest in, or who they can't lend to, or who they can't invest in,” Mr Byres said.
“That is a business decision every financial institution has to make.
“What we want, and the guidance is designed to help them in this regard, is we want to make sure when they're making those decisions, they're doing so in a well-informed manner.
“[We want them to] understand those risks, and they understand the opportunities as well, because there are opportunities that will come from a changing climate.”
Kobad Bhavnagri, head of economics and policy at Bloomberg New Energy Finance, says APRA should actively encourage change.
“The problem in Australia is that very common-sense measures on climate get political pushback,” he told reporters.
“Even though the business community desires this level of clarity, there is political pushback because of Australia's sad and endless infighting and inability to come to terms with the reality of climate change and the clean transition.”
He says businesses and their boards should be able to take action on climate change without worrying about their stakeholders or the company's bottom line in the short term.
APRA's Wayne Byres said the regulator is staying out of politics.