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What the recent announcements from IFRS and OSFI mean to Canadian lenders

Climate-related extremities are making headlines both globally and in Canada. With British Columbia and the Northwest Territories experiencing a record-breaking wildfire season and Nova Scotia recovering from recent devastating floods, new history is being recorded across Canada for physical damages to real estate assets resulting from climate-related weather events such as flood, fire, extreme winds and landslides.

As concerns around climate change gain focus, Canadian and global regulators have recently been issuing advice, standards and guidelines for institutions to report their portfolio’s exposure to climate-related risks.

Aligning with Task Force on Climate-Related Disclosures guidelines, the IFRS S2 Climate-related Disclosures Standard sets out the requirements for an entity to disclose information about its exposure to climate-related physical risks. OSFI’s climate risk management guideline, B-15, establishes OSFI’s expectations related to the FRFI’s management of climate-related physical and transition risks. In accordance with these guidelines, Teranet’s climate risk solutions can assist institutions with:

  • quantifying estimated losses for real estate assets from climate change;
  • assessing related physical risks and accepting and mitigating those risks; and
  • complying with disclosure standards.

As outlined in a recent blog post, Teranet understands the significance of climate change risk to real estate assets in Canada and is committed to providing our valued customers with the solutions they require to manage risk and meet regulatory requirements. Our solution can be incorporated into financial disclosures and regulatory reporting to address requirements growing out of the new guidelines. We’ve paired our national residential property dataset with an extreme weather event probability model provided by our partner, Morningstar Sustainalytics, to prepare a framework that supports default modeling for asset damages from flood, fire, extreme wind and landslides. We can support lending institutions’ climate risk management journey at an asset level, allowing them to devise methodology and loss aggregation patterns to fulfill the current set of regulatory requirements.

Teranet’s climate risk solution assists Canada’s lenders to stay informed of climate change and it’s impact on mortgage portfolios and helps to mitigate risks at the lending level.

As a dedicated and trustworthy partner, Teranet is prepared to hear about your plans and share how our solution can meet your needs. If you’d like to learn more about Teranet’s Climate Risk Solutions, please contact a Teranet account manager.