The Australian Prudential Regulation Authority (APRA) has released draft guidance on managing the risks of climate change following industry requests for greater clarity on expectations.

The guidance covers APRA’s view of sound practice in areas such as governance, risk management, scenario analysis and disclosure, but does not create new requirements or obligations.

Chairman Wayne Byres says APRA has been raising awareness of climate-related risks to the financial sector since Australia became a party to the Paris Agreement, but processes to measure monitor and manage risks are still developing.

“The prudential practice guide doesn’t direct or prevent APRA-regulated entities making any particular business or investment decision,” he said.

“Rather, it is aimed at ensuring decisions are well-informed and appropriately consider both the risks and opportunities that the transition to a low carbon economy creates.”

APRA is seeking feedback on the draft, CPG 229, by July 31 and plans to release a final version before the end of the year.

More details are available here.