Both the Financial Stability Board (FSB) of the G20 and the Bank of Canada have stated that climate change is a significant risk for financial sector stability. But assessing climate change-related risks is complex, since the information needed for such assessments is fragmented, incomplete or not yet available. Strategies and tools are needed to analyze the impact of climate change on the Canadian financial sector, but these tools do not exist yet. This paper reports on the results and policy recommendations of a project about climate risks and opportunities in the Canadian financial sector. The project involved interviews with financial sector representatives and an extensive literature analysis. Results suggest that the interest in climate change-related risks and opportunities is opportunity driven for some organizations, while for others it is risk driven. Banks appear to be less exposed to the impacts of climate change than insurance companies are, since their assets are shorter term in nature and their lending and investment portfolios are typically more diversified. Finally, the results of the interviews with financial sector representatives demonstrate that there is uncertainty about how well prepared Canadian financial institutions are for climate change-related disclosure requirements, such as the one published by the FSB Task Force on Climate-related Financial Disclosures. Therefore, it is recommended that climate change-related risk and opportunity assessment tools should be developed that are based on climate change scenarios and Canadian climate change mitigation and adaptation strategies. These assessment tools should assess the different types of climate-related risks, such as regulation risks, reputational risks, physical risks and transition risks that occur through the transition to a low-carbon economy. Finally, it is proposed that strategies should be developed to integrate the Canadian financial sector in climate finance in Canada.
