Office of the Superintendent of Financial Institutions
On January 11, 2021, OSFI released a discussion paper entitled “Navigating Uncertainty in Climate Change.” In this Discussion Paper, OSFI sought feedback on risks arising from climate change that can affect the safety and soundness of federally regulated financial institutions (FRFIs) and federally regulated pension plans (FRPPs).
OSFI received feedback on its Discussion Paper from over 70 respondents, including FRFIs, FRPPs, industry and professional associations, interested organizations and individuals. OSFI thanks those who submitted comments.
Respondents to the Discussion Paper generally support OSFI’s focus on climate-related risks. Many FRFI and FRPP respondents indicated they are in the early stages of assessing and quantifying these risks. There was general agreement that any new OSFI climate-related guidance be principles-based and aligned with global standards where they exist, while considering the Canadian context.
OSFI received a range of suggestions on climate-related scenario analysis, disclosure, taxonomy, and measurement metrics, among other things. The attached Annex provides a brief summary of responses to the consultation.
For FRFIs, OSFI agrees guidance on climate-related risks should be principles-based and consider the Canadian context as well as international developments. Furthermore, any such guidance would be best informed by results from the Bank of Canada-OSFI
joint pilot project on climate risk scenarios, for which stakeholders can expect further communication later this year. Taking these factors into account, OSFI expects to communicate next steps on its climate-related policy work early next year.
OSFI will also continue to monitor, through its supervision of FRFIs, other Environmental, Social and Governance (ESG) factors for potential linkages to FRFI safety and soundness.
For FRPPs, OSFI will continue collaborating with the Canadian Association of Pension Supervisory Authorities to develop
guidance on integrating ESG factors in pension investment decisions where they are relevant to the financial performance of an investment pursuant to the plan administrator’s fiduciary duty to act prudently. OSFI will assess the need for additional guidance thereafter.
Respondents agreed that climate-related risks are drivers of financial and non-financial risks FRFIs and FRPPs manage. They indicated that:
Respondents suggested FRFIs could manage climate-related risks through existing governance and risk management frameworks and new tools such as climate-related scenario analyses. However, many FRFIs indicated they are in the early stages of assessing and quantifying climate-related risks. They indicated that:
Respondents indicated that it would be appropriate for FRPP administrators to consider climate-related risks and other ESG factors in investment decisions where they are relevant to the financial performance of an investment pursuant to their fiduciary duty to act prudently. They indicated that:
Respondents cited stakeholder interest as a key driver of voluntary climate-related financial disclosures. They indicated that:
Many respondents recommended that any new OSFI guidance be principles-based and aligned with global standards where they exist, while considering the Canadian context, though some recommended a more prescriptive approach. Generally, respondents indicated that OSFI could: