OSFI takes data-driven approach to understanding potential impacts of climate risks at financial institutions
News release - Ottawa -
Today, the Office of the Superintendent of Financial Institutions (OSFI) released the final version of the Standardized Climate Scenario Exercise (SCSE).
The Standardized Climate Scenario Exercise is a tool for measuring the potential exposure of financial institutions to climate risk. It will foster better understanding of how climate-related risks may impact financial institutions, their counterparties, and the industry more broadly. More specifically, the SCSE will:
- gather data to help OSFI assess potential risks related to climate change and prepare for future challenges;
- identify vulnerabilities in the financial system; and
- build institutions’ capacity to conduct climate scenario analysis and risk assessments.
Financial institutions and the regulators that oversee them need insights driven by data to be able to better manage climate-related risks to these institutions. OSFI is working with the Autorité des marchés financiers (AMF) in Quebec, who will run the SCSE in parallel with their regulated financial institutions. Together, OSFI and the AMF will expand the type and number of financial institutions submitting results for analysis.
The final SCSE reflects feedback received through a two-part public consultation process that began in fall 2023. OSFI published a summary of the feedback from the second phase of consultations.
The deadlines for financial institutions to submit their results are:
- December 13, 2024 - for credit and market risk modules
- January 24, 2025 - for flood and wildfire risk modules, the real estate transition risk exposure assessment, and the questionnaire
Results should be sent to ClimateScenario-ScenarioClimatique@osfi-bsif.gc.ca. OSFI and the AMF will report on the aggregate results of the exercise in the spring of 2025.
Quote
The final version of the Standardized Climate Scenario Exercise is the result of over 18 months of planning and consultation. I would like to thank the Autorité des marchés financiers for their collaboration and those who provided comments. I look forward to seeing the results, which will advance climate risk management practices at financial institutions.
- Peter Routledge, Superintendent of Financial Institutions
What we are initiating today is the result of rigorous efforts made by our respective teams. I am looking forward to this fruitful collaboration with the Office of the Superintendent of Financial Institutions. The AMF needs a harmonized approach for the implementation of robust support for financial institutions in managing their climate-related risks, the impacts of which are considered systemic.
- Yves Ouellet, AMF President and CEO
Quick facts
- OSFI announced the first phase of the SCSE consultation in October 2023 and the second phase in April 2024. After 120 days of public consultations with 350+ participants, the final version of the exercise includes a questionnaire that will be completed by financial institutions.
- Foreign bank branches, federally regulated pension plans, and financial institutions in run-off, are not required to complete the exercise.
- OSFI and the AMF will only receive results from the respective financial institutions they regulate. OSFI and the AMF have shared data sources to complete the exercise directly with financial institutions.
- OSFI is publishing the SCSE outside of the quarterly release schedule as the exercise and data requirements involve partnerships with other organizations.