Climate change and society’s response to it are already reshaping the global economy, according to the Australian Prudential Regulation Authority (APRA).

In a speech to the Centre for Policy Development in Sydney last week, Executive Member Geoff Summerhayes outlined the regulator’s view that climate-related financial risks are no longer future concerns but are “foreseeable, material and actionable now”.

“APRA has a clear duty to warn the institutions we regulate if we identify risks that could threaten the interests of Australia’s financial beneficiaries or the overall stability of the system,” he said.

He says “mounting international scientific evidence” suggests global warming will result in more frequent and more intense natural disasters, and population growth and urban development in high-risk areas will contribute to rising costs.

“APRA’s concern here goes beyond the impact more frequent and damaging natural disasters may have on insurers’ balance sheets and their capacity to pay claims.

“It also flows through to insurers’ ongoing ability to keep premiums affordable and available in high-risk areas.”

Mr Summerhayes concedes “APRA is not a scientific body”, and he cannot say for sure how scientists’ predictions will affect the Australian economy.

“But what I can tell you with absolute certainty is that the transition to a low-carbon economy is under way and moving quickly. The weight of money, pushed by commercial imperatives such as investment, innovation and reputational factors, is increasingly driving that shift, rather than scientists or policymakers.

“So while the debate continues about the physical risks, the transition to a low-carbon economy is under way, and that means the so-called transition risks are unavoidable: changes to market sentiment, new financial or environmental regulations, or the emergence of new technologies with the potential to prompt a reassessment of the value of a large range of assets, and consequently the value of capital and investments.”