By Paulina Duran
SYDNEY, April 22 (Reuters) - Australia's prudential regulator on Thursday unveiled long-awaited guidance for banks, insurers and pension funds around managing and disclosing climate-related risks, including physical, transition and liability exposures.
Issuing a draft version for consultation, the Australian Prudential (LON:PRU) Regulation Authority (APRA) said the guidance paper aimed to give greater clarity of its expectations but it did not create new requirements or obligations.
The guide was developed in consultation with peer regulators globally and is aligned with the recommendations from the global Task Force on Climate-related Financial Disclosure (TCFD), set up by the G20 rich countries to coordinate rules.
"Given the unique and long-term nature of the risks ... processes to measure, monitor and manage climate-related financial risks are still developing," Chair Wayne Byres said in a statement.
He added the guide doesn't direct or prevent APRA-regulated entities from making particular business decisions but aims to ensure decisions are well-informed and consider "risks and opportunities that the transition to a low carbon economy creates."
The paper states financial institutions must consider and report on their planning for mitigating the impacts of climate-related risks on a range of other risks including credit, market, operational, underwriting and reputational risks.
Management must also set clear lines of responsibilities in the managing climate-related risks, and company boards must hold senior management to account for such responsibilities.
Material exposures should be monitored by company boards and senior management, the paper said, adding that it considers the TCFD framework to be a "sound basis" for disclosing information to stakeholders.
The regulator called for feedback to its guidance by July 31, and expects to release a final version before year end.