Bank of Canada and OSFI launch pilot project on climate risk scenarios

News release

For immediate release

OTTAWA – November 16, 2020 – Office of the Superintendent of Financial Institutions

The Bank of Canada and the Office of the Superintendent of Financial Institutions (OSFI) today announced plans for a pilot project to use climate-change scenarios to better understand the risks to the financial system related to a transition to a low-carbon economy. A small group of institutions from the banking and insurance sectors will participate voluntarily in the project.

Scenario analysis is a useful tool for identifying potential risks in an environment of considerable uncertainty. Climate-change scenarios related to a transition to a low-carbon economy explore different pathways for emissions reductions – driven by changes in policy, technology, and consumer and investor preferences – and their implications for the economy and financial system.

The project aims to:

  • build the climate scenario analysis capability of authorities and financial institutions, and support the Canadian financial sector in enhancing the disclosure of climate-related risks
  • increase authorities’ and financial institutions’ understanding of the financial sector’s potential exposure to risks associated with a transition to a low-carbon economy
  • improve authorities’ understanding of financial institutions’ governance and risk-management practices around climate-related risks and opportunities

“Climate change is a major challenge for the economy, and it is accelerating. We need to accelerate our work to understand the implications for the economy and the financial system,” said Bank of Canada Governor Tiff Macklem. “This project will generate valuable lessons for assessing and managing climate risks. With the private sector’s help, we will be able to combine climate analysis with economic and financial data to ensure we have the best information possible to fulfill our mandate.”

- Bank of Canada

“Everyone, including the financial sector, will have to adjust to the new reality of climate change. The shape of that new reality will depend on many complex issues and on much that remains uncertain,” said Jeremy Rudin, Superintendent of OSFI. “This pilot project will allow us to refine our focus on the prudential aspects of climate change.”

- Office of the Superintendent of Financial Institutions

Building on previous workon climate-change scenarios for the global economy, the Bank and OSFI will first develop a set of climate-change scenarios that are relevant for Canada. Using these scenarios, participants will explore the potential risk exposures of their balance sheets. The Bank and OSFI will publish a report, planned for the end of 2021, sharing details on the specific scenarios, methodology, assumptions and key sensitivities.

This project is not intended to serve as an assessment of individual financial institutions’ exposure to climate-related risks or the broader financial sector’s resilience to transition risks. Further, the selection of project participants is not an endorsement of their current approaches to the management or disclosure of climate risks.

The following financial institutions will participate in the project:

  • Intact Financial
  • Manulife
  • Royal Bank of Canada
  • Sun Life Financial
  • TD Bank Group
  • The Co-operators Group Limited

Additional information


The Office of the Superintendent of Financial Institutions (OSFI) is an independent agency of the Government of Canada, established in 1987, to protect depositors, policyholders, financial institution creditors and pension plan members, while allowing financial institutions to compete and take reasonable risks. OSFI supervises more than 400 federally regulated financial institutions and 1,200 pension plans to determine whether they are in sound financial condition and meeting their prudential requirements.

The Bank of Canada is the nation's central bank. Its principal role is "to promote the economic and financial welfare of Canada," as defined in the Bank of Canada Act. The Bank has four main areas of responsibility. In implementing Canada’s monetary policy, the Bank aims to preserve the value of money by keeping inflation low, stable and predictable. The Bank also promotes safe, sound and efficient financial systems, designs, issues and distributes Canada’s bank notes, and acts as fiscal agent and banker for the Government of Canada.

Media Contacts

OSFI - Public Affairs

Bank of Canada - Media Relations