Canadian banks, insurers to take part in climate project
Some of Canada’s largest banks and insurers are set to participate in a pilot project to better understand the risks to the financial system from the transition to a low-carbon economy, Canada’s central bank and financial regulator said.
Canada’s biggest lenders, Royal Bank of Canada and Toronto-Dominion Bank; and insurers Manulife Financial Corp, Sun Life Financial, Intact Financial Corp and The Co-operators Group will participate, the Bank of Canada and the Office of the Superintendent of Financial Institutions (OSFI) said in a statement.
The Bank of Canada and OSFI will develop a set of climate-change scenarios relevant for Canada, which participants will apply to their balance sheets to find potential risk exposures, the statement said.
Canada is the world’s fourth-largest oil producer and has the highest emissions per barrel among major oil nations, according to Rystad Energy. The oil and gas sector contributes about 10% to Canada’s GDP, and the reliance on fossil fuels could potentially mean bigger climate-related risks to the financial institutions as the economy pivots to a low-carbon future.
A report is expected to be published by the end of 2021.
“With the private sector’s help, we will be able to combine climate analysis with economic and financial data to ensure we have the best information possible to fulfill our mandate,” Bank of Canada Governor Tiff Macklem said in the statement.
The project’s aims include enabling authorities and firms to analyze climate scenarios and increase their understanding of potential climate-related risks, and enhance understanding of companies’ governance and risk management, the statement said.
This project will not assess individual financial firms’ exposure to climate-related risks or the sector’s resilience, they said.
(Reporting by Nichola Saminather Editing by Paul Simao)
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