CASE STUDY 4.1: Test case for datasets and information for managing climate risk in the Australian banking and finance sector
The release of the Financial Stability Board Taskforce on Climate-related Financial Disclosures report in 2017 and the Australian Prudential Regulation Authority’s Australia’s New Horizon: Climate Change Challenges and Prudential Risk statement significantly raised the awareness of climate change risk in corporate Australia. Such guidance has highlighted the pressing need for the Australian banking and finance sector (banks, insurance, actuaries, etc.) to assess what physical climate change risk typically means for their business. However, existing projections data and information are not tailored to the specific needs of this sector.
We’ve engaged across the financial services sector to identify the science-based climate change data and information needs of the sector, and have examined options for tailoring projections and other products and services for the Australian banking and finance sector.
This case study found that the current generation of available climate information (based on observations and projections, including associated training, information and data products) can be useful to the financial services sector in some cases but doesn’t do all that is needed for many specific applications. Different components of the sector need different information, but there are some common threads.
The delivery of climate information can be readily enhanced, including through provision of:
- Targeted guidance, training and background learning
- Information specifically relevant to financial risk and exposure
- Protocols for using future climate projections so analyses are defensible
- More information about extremes, compound extremes and ‘worst case’ scenarios to stress-test systems
- Greater accessibility and utility of relevant data and information including enhanced visualisation tools and integration with financial management models
The case study report (link below) provides a summary of the findings of this case study.
Completed: April 2019
More information: Dr Geoff Gooley, ESCC Hub Program Manager