Bank of Canada begins disclosing climate-related risks
The Bank of Canada began disclosing climate-related risks to its operations and balance sheet this week – a move intended to inspire other financial institutions to raise their game on climate-related disclosure.
The report, published alongside the bank’s annual report on Monday, details the bank’s own greenhouse gas emissions and looks at how vulnerable its operations are to natural disasters. It also attempts to quantify how exposed its balance sheet and pension plan are to climate-related risks.
The central bank is not a normal financial institution, and the risks it faces are considerably different than those experienced by commercial lenders. Still, the report offers a basic model for disclosure at a time when regulators are leaning on financial institutions to explain their vulnerability to climate change – both physical threats, such as fires and floods, and risks tied to changing regulations and consumer demand.
“By disclosing this, and by signalling to the market that the central bank thinks this is important enough to release a report on, it also signals to the financial institutions and to the system that this is something they’re going to have to do,” said Ryan Riordan, a professor of finance at Queen’s University and director of the university’s Institute for Sustainable Finance.
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