The Australian Prudential Regulation Authority (APRA) plans to publish climate change financial risk guidance by the end of the year and has called on firms to provide “market-useful” information on how they are managing the risks.

Executive Board Member Geoff Summerhayes says the proposed prudential practice guide is in response to requests for greater clarity about regulatory expectations, but is not intended to create new obligations.

“This guidance will be informed by APRA’s engagement with other regulators domestically and internationally, as well as its ongoing engagement with industry participants,” Mr Summerhayes says in a note to regulated entities.

APRA plans to consult on the draft guide in the middle of the year.

Mr Summerhayes says APRA’s 2018 climate change survey highlighted the fact that many large entities understand the financial risks and opportunities from a changing climate, but there is a need to address a data deficit and quantify likely impacts.

“This needs to ultimately be tackled through scenario analysis, stress testing and disclosure of market-useful information,” he says.

“Effective action now on these fronts will promote strong understanding and management of the potential financial impacts of a changing climate on current and future business prospects, allowing well-managed entities to minimise costs and optimise benefits.”

Deeper supervisory assessments of firms that participated in the 2018 survey are due to be completed mid-year.