Draft Business Specifications for the Climate-Related Risk Returns for Deposit-Taking Institutions (DTIs)

Document Properties

• Type of Publication: Draft manual of reporting
• Date: June 2023

Purpose

These returns capture data to enable quantification of the Deposit-Taking Institutions’ (DTIs’) 1) potential and realized physical risk exposures; and 2) potential transition risk exposures, as at fiscal year-end.

More specifically, these returns collect data on:

• asset exposures that are subject to physical risk, by geophysical location
• absolute greenhouse gas (GHG) emissions (Scopes 1, 2 and 3)

Application

These returns apply to all DTIs, except for foreign bank branches.

Frequency

Annual.

Filing Format

Returns are to be filed through RRS in .CSV format.

Reporting Date

The returns must be completed on a fiscal year-end basis and filed within 90 days of the fiscal year-end date.

Implementation Date

These Returns are effective for the fiscal years ending on or after October 1, 2024.

Contact Agency

Office of the Superintendent of Financial Institutions (OSFI).

Contact Person

For business and/or interpretation questions on the consultation version of the return, contact us through the Climate Risk Return email address: ClimateRiskReturn-ReleveRisquesClimatiques@osfi-bsif.gc.ca.

Key Terms and Definitions

Units of Measurement for Reporting

Financial Figures

Reported financial figures, such as outstanding loan balances or investment security values, should be expressed in thousands of Canadian Dollars or Canadian Dollar Equivalent, with no commas or other separators, unless otherwise specified.

Greenhouse gas (GHG) Emissions

All reporting on Absolute GHG Emissions, including Scope 1, Scope 2 and Scope 3 emissions should be reported in metric tons of carbon dioxide-equivalent (tCO₂-e), to 2 decimal places.

Probabilities and Percentages

All probabilities and percentages should be reported as their decimal equivalents. For example, a probability of default (PD) of 1.09% should be reported as 0.0109.

Greenhouse gas emissions accounting

Regarding calculation of GHG emissions, the FRFI is expected to use the latest GHG Protocol Corporate Accounting and Reporting Standard and the latest GHG Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard.

Regarding calculation of the portion(s) of Scope 3 GHG emissions, pertaining to the FRFI’s financed, and/or insurance-associated GHG emissions, the FRFI is expected to use the latest Partnership for Carbon Accounting Financials’ (PCAF’s) Global GHG Accounting and Reporting Standard for the Financial Industry (PCAF Standard).

Structure of the Climate-Related Risk Returns for DTIs

Tabular Structure of the Climate-Related Data Return Templates

Each data return is structured to contain three types of data fields:

• Sub-Table Field
• Categorical Data Fields
• Calculated Data Fields

An illustration, using an example from the structure of the DC1 Return, is shown below.

1. Sub-Table Field: This data field is used to report the Sub-Table of the return (return_subtable). See the section Return Sub-Tables below for further details.
2. Categorical Data Fields: These data fields are used to report qualitative data that are mutually exclusive. Categorical fields used in the Climate-Related Risk Returns for DTIs has submission keys as follows: asset_class, region, industry, credit_quality and fsa.
3. Calculated Data Fields: The data reported in these fields are to be calculated to reflect the maximum granularity established by the applicable Categorical Data Fields, unless otherwise noted. Referencing the illustration above, the number of loans reported as 213 in the first row in the field number_assets would represent (be calculated as) the count of assets (loans) in the Forward Sortation Area (fsa) T1A that are of the asset_class code ‘6’ (‘Retail Mortgages – Other Insured’).

Reference Format

Submission keys that identify each data field being collected are included in the first row of each template. For ease of identification within this document, submission keys are formatted in lower case with underscored spacing, such as return_subtable.

For categorical fields, categorical codes and their related values are listed in single quotes, such as code ‘6’ and ‘Retail Mortgages – Other Insured’ respectively.

Categorical Field Selections

Tables listing the comprehensive list of the codes (range of expected values) applicable to each of the categorical fields, other than fsa, are provided in the appendices to this document as follows:

• Appendix I – Asset Classes
• Appendix II – Regions
• Appendix III – Industries
• Appendix IV – Credit Quality Ratings

These tables correspond to those included in the input templates for the DC1 and DC2 returns.

Return Sub-Tables

For reporting purposes, each return consists of a single data table that are divided into sub-tables that group related reporting data elements. The sub-tables for each of the returns are as follows:

Field Applicability by Sub-Table

The fields applicable for each Sub-Table are outlined in the Field Applicability Matrices document (XLSX, 29.1 KB). As shown in the Field Applicability Matrices, the calculated fields are to be reported based upon the Return Sub-Table and the asset_class field value for both the DC1 and DC2 returns. Non-applicable fields should be reported as blank on each row.

Instructions for the Physical Risk Return (DC1)

This return collects foundational risk exposures and select credit risk data at an FSA level of geophysical granularity on loans subject to potential climate-related physical risk from DTIs within Canada, and at a regional level of granularity outside of Canada. The data collected will be combined with other climate peril data to assess DTIs’ exposures to physical risk.

Overview of Return Data Fields

The following fields are included in the DC1 return template:

Sub-Table Field

return_subtable

Categorical Data Fields

• asset_class
• region
• fsa

Calculated Fields

• number_assets
• balance_authorized
• balance_outstanding
• weighted_average_pd
• weighted_average_lgd

The above fields are to be reported by completing the template contained in the technical specifications document provided at DC1 Technical Specifications (XLSX, 48.8 KB), following the instructions below for reporting loan exposures and credit metrics applicable in Canada and outside of Canada.

Field Applicability by Sub-Table

The fields applicable for each Sub-Table are outlined in the Field Applicability Matrices (See Link: Field Applicability Matrices document (XLSX, 29.1 KB)).

Sub-Table DC1-A: Exposures and Credit Risk Metrics – In Canada

Report on all fields in the template for loans to borrowers and/or secured on assets residing in Canada on each row, per the instructions by submission key below.

Sub-Table Field

• return_subtable – Set field value to ‘DC1-A’

Categorical Data Fields

• asset_class – Report the applicable asset_class code per table in Appendix I – Asset Classes.
• region – Report as blank on each row reported.
• fsa – Report the 3-digit Forward Sortation Area (FSA) location reference of the borrowers/assets, for Canadian addresses only. If the DTI’s reported assets, such as borrowings that are tied to physical location of assets for certain large accounts, such as corporates, banks or sovereign borrowers (e.g. Government of Canada) that cannot be specifically divided across multiple FSAs using available client data, DTIs should report using the code ‘ZZZ’ for the FSA.

Calculated Data Fields

• number_assets – Report the count of the assets (e.g., non-residential mortgage loans) outstanding for a given asset_class in each reported fsa
• balance_authorized – Report the sum of the maximum gross dollar amounts of exposure authorized within a given asset_class in each reported fsa
• balance_outstanding – The sum of gross amounts of exposures outstanding for a given asset_class in each reported fsa
• weighted_average_pd – Report the exposure weighted average probability of default for the asset_class in each reported fsa
• weighted_average_lgd – Report the exposure weighted average LGD for the asset_class in each reported fsa

Amounts reported for balance_authorized and balance_outstanding should be calculated as the sums of each type of exposure at the appropriate level of granularity. weighted_average_pd and weighted_average_lgd reported should reflect the exposure weighted average for each asset_class for each fsa.

Sub-Table DC1-B: Exposures and Credit Risk Metrics – Outside Canada (By Region)

Report on all fields in the template for loans to borrowers and/or secured on assets residing outside Canada. Report all fields in the template, per the instructions by submission key below. However, the fsa data field should be reported as blank on each reported row.

Sub-Table Field

• return_subtable – Set field value to ‘DC1-B’ on each row reported

Categorical Data Fields

• asset_class – Report the applicable asset_class code per table in Appendix I – Asset Classes.
• region – Report the applicable code for each region of the USA and the ‘Other’ geographic region per the table in Appendix II – Regions on each row reported. If the DTI’s reported assets, such as borrowings that are tied to physical location of assets by for large client accounts in the USA, such as corporates, banks or sovereign borrowers that cannot be specifically divided across multiple regions using available client data, DTIs should report using the region ‘USA-Other’.
• fsa – Report as blank (this field is applicable In Canada only)

Calculated Data Fields

• number_assets – Report the count of the loans outstanding for a given asset_class in each reported region
• balance_authorized – Report the sum of the maximum gross dollar amounts of exposure authorized within a given asset_class in each reported region
• balance_outstanding – The sum of gross amounts of exposures outstanding for a given asset_class in each reported region
• weighted_average_pd – Report the exposure weighted average probability of default for the asset_class in each reported region
• weighted_average_lgd – Report the exposure-weighted average LGD for each applicable asset_class in each reported region

Amounts reported for balance_authorized and balance_outstanding should be calculated as the sum of each type of exposure for each asset_class for each region that is outside of Canada. weighted_average_pd and weighted_average_lgd should be calculated to reflect the exposure weighted average for each applicable asset_class for each region that is outside of Canada.

Additional Reporting Guidance

The technical specifications document for the DC1 return, that includes a template sheet, field definitions and reference tables is available at DC1 Technical Specifications (XLSX, 48.8 KB). For a reference example of a completed template that contains an abbreviated listing of completed rows following the above DC1 template instructions, see the sample DC1 Return template (DC1 Example Return Filing (CSV, 4.1 KB)).

Instructions for the Transition Risk Return (DC2)

This return collects entity-level absolute GHG emissions by scope, including scope 3 financed emissions that are assigned to Investment Securities and Loans.

Overview of Return Data Fields

The following fields are included in the DC2 Return templates:

Sub-Table Field

return_subtable

Categorical Data Fields

• asset_class
• industry
• region
• credit_quality

Calculated Fields

• scope_1_absolute_emissions
• scope_2_absolute_emissions
• scope_3_absolute_emissions
• data_quality_score
• asset_balance
• weighted_average_maturity
• balance_5_maturity
• balance_10_maturity

The above fields are to be reported by completing the template contained in the technical specifications document provided at DC2 Technical Specifications (XLSX, 52.5 KB), following the instructions below for reporting loan exposures and credit metrics applicable in Canada and outside of Canada.

Field Applicability by Sub-Table

The fields applicable for each Sub-Table are outlined in the Field Applicability Matrices (See Link: Field Applicability Matrices document (XLSX, 29.1 KB)).

Sub-Table DC2-A: Entity-level GHG Emissions by Scope

Report emissions by scope for each row using the instructions by submission key below.

Sub-Table Field

• return_subtable – Report field value as ‘DC2-A’

Categorical Data Fields

• asset_class – Set field value to code ‘18’ (‘Unassigned’) for each row reported; reporting on other asset categories is not applicable for Sub-Table DC2-A (see Field Applicability by Sub-Table section above for details)
• industry – Not applicable; report as blank
• region – Report the region code applicable province or territory of Canada, Region of USA or ‘Other’ geographic region per the table in Appendix II – Regions
• credit_quality – Not applicable; report as blank

Calculated Data Fields

• scope_1_absolute_emissions – Report the FRFI’s Absolute Scope 1 GHG Emissions (in tCO₂-Equivalent) produced within each reported region
• scope_2_absolute_emissions – Report the FRFI’s Absolute Scope 2 GHG Emissions (in tCO₂-Equivalent) within each reported region
• scope_3_absolute_emissions – Report the FRFI’s Absolute Scope 3 GHG Emissions (in tCO₂-Equivalent) within each reported region; amount reported should include Financed Emissions
• data_quality_score – Report the Partnership for Carbon Accounting Financials (“PCAF”) Data quality score (1 to 5) on scoped emissions generated within each reported region
• Report the following fields as blank on each row:
  • asset_balance
  • weighted_average_maturity
  • balance_5_maturity
  • balance_10_maturity

Sub-Table DC2-B: Financed GHG Emissions by Asset Class

For purposes of reporting Scope 3 Financed Emissions, report on each row using the instructions by submission key below.

Sub-Table Field

• return_subtable – Set field value to ‘DC2-B’

Categorical Data Fields

• asset_class – Report on each of the defined asset categories (see table in Appendix I – Asset Categories for reference). Do not report using asset_class code ‘18’ (‘Unassigned’) for reporting on Financed GHG Emissions. For each selection within the asset_class, certain categorical fields may be applicable (see Field Applicability by Sub-Table section above for reference).
• industry – If applicable per the Field Applicability Matrices, report the applicable industry code for each asset_class per the table in Appendix I – Asset Categories; otherwise report the industry field for each of the non-applicable rows as blank
• region – If applicable region code for the applicable asset_class per the Field Applicability Matrices, report the applicable province or territory of Canada, Region of USA or ‘Other’ geographic region per the table in Appendix II – Regions; If the DTI’s reported assets, such as borrowings that are tied to physical location of assets by for certain large accounts, such as corporates, banks or sovereign borrowers that cannot be specifically divided across multiple regions using available client data, filers should report using ‘Canada-Other’ and/or ‘USA-Other’ in the region field.
• credit_quality – If applicable for the asset_class per the Field Applicability Matrices, report the applicable credit_quality code for each row per the table in Appendix IV – Credit Quality Ratings; otherwise, report the credit_quality field for the non-applicable rows as blank

Calculated Fields

• scope_3_absolute_emissions – Report the applicable amount of Absolute Scope 3 GHG Financed emissions for each asset_class by each region category (if applicable) by each industry category (if applicable) by each credit_quality category (if applicable).
• data_quality_score – Report the PCAF Data quality score (1 to 5) on scoped emissions generated for each asset_class by each region category (if applicable) by each industry category (if applicable) by each credit_quality category (if applicable).
• asset_balance – Report the financial balance (exposure) for the applicable for each asset_class by each region category (if applicable) split by each industry category (if applicable) by each credit_quality category (if applicable).
• weighted_average_maturity – Report the applicable exposure weighted remaining maturity, measured in years, for each asset_class split by each region category by each industry category (if applicable) by each credit_quality category (if applicable).
• balance_5_maturity – Report the dollar amount of the asset_balance with a remaining maturity of between 5 and 10 years.
• balance_10_maturity – Report the dollar amount of the asset_balance with a remaining maturity greater than 10 years.

Additional Reporting Guidance

The technical specifications document for the DC2 return, that includes a template sheet, field definitions and reference tables is available at DC2 Technical Specifications (XLSX, 52.5 KB). For a reference example of a completed template that contains an abbreviated listing of completed rows following the above DC2 template instructions, see the sample DC2 Return template (DC2 Example Return Filing (CSV, 4.8 KB)).

Appendix I – Asset Classes

The following coding is to be used for the asset_class field when completing the DC1 and DC2 Returns. The coding selections below for securities reflect the asset classifications on the M4 Balance Sheet return. Note that the ‘Other Securities – Debt’ category from the M4 was split to identify corporate debt as ‘Other Securities – Corporate Debt’ and the remaining other debt securities as ‘Other Securities – Other Debt’. For definitions of the asset class categories pertaining to loans, please see the Basel Capital Adequacy Requirements (Standardized), per Chapter 4 of the BCAR guideline. The ‘Unassigned’ asset class is to be used for reporting on entity-wide emissions in the DC2 return sub-table 'DC2-A' only, and it is not intended to be used in lieu of reporting emissions by specific asset classes in DC2 return sub-table 'DC2-B'.

Report in the asset_class field using the codes shown below.

Appendix II – Regions

The categorical codes shown in the table below are to be used for the region field when completing the DC1 Return and the DC2 Return. The name for each region, along with a Region Description that lists the constituent region(s) associated to each Region code are also listed in the table below. For example, the Region code ‘US2’, described as ‘USA Midwest’ is constituted of a grouping of states of the USA including: ‘IA’, ‘IL’, ‘IN’, ‘KS’, ‘MI’, ‘MN’, ‘MO’, ‘ND’, ‘NE’, ‘OH’, ‘SD’, and ‘WI’.

Report in the region field using the codes shown below.

Appendix III – Industries

The coding selections shown in the table below are to be used for the industry field when completing the DC2 Return. The descriptions for each industry code, including an industry name and the applicable NAICS descriptions and NAICS code(s) that consitute the defined Industry code are also provided in the table below. For the Industry codes ‘1’ (‘Air Transportation’) to ‘23’ (‘Water Transportation’), which are considered high-GHG emitting industry sectors, one or more than one NAICS code may apply.

The remaining codes, between ‘24’ and ‘42’ inclusive, that have the prefix ‘Other Non-HES-’ are not considered to be high-emitting industry sectors. In order to ensure mutual exclusivity, when reporting using the categories for the codes with the prefix ‘Other Non-HES-’, amounts reported for the related high-emitting industry sectors (as listed for Industry codes ‘1’ to ‘23’) should be excluded to avoid double-counting.

Report in the industry field using the codes shown below.

Appendix IV – Credit Quality Ratings

Externally-assigned ratings of long-term borrower creditworthiness are assigned on debt security issuers and wholesale borrowers including corporates, banks and sovereigns. To facilitate comparison, ratings from several recognized credit rating organizations should be mapped into the credit_quality categories shown in the table below. For reporting purposes on the DC2 return, borrowers should be grouped within each credit_quality category; borrowers are not to be reported individually.

Report in the credit_quality field using the codes shown below.