The head of Australia's financial regulator has warned banks of the "increasingly very real" impacts of climate change on finance.
Wayne Byres, the Chair of the Australian Prudential Regulation Authority (APRA), recently urged the country's banks to consider the business risks of climate change including a drop in the value of fossil fuel assets such as coal-fired power plants.
He told the Committee for Economic Development of Australia (CEDA) that banks must consider climate change in their decision-making, announcing that APRA and the Commonwealth Scientific and Industrial Research Organization (CSIRO) will conduct climate stress tests of the big five banks.
"Transition risks are evident in the shifts occurring in the value of climate-affected assets," Byres said in a speech. "Financial institutions need to think about how these actions will impact on their businesses, as well as those of their customers."
"Those changes are not just the physical risks from a changing climate itself, but also from government policy changes occurring around the world, which are in turn changing the dynamics of economies and industries, as well as changing investor demands and community expectations," he said.
Byres pointed to the example of the Bluewaters coal-fired power station in Western Australia (WA) written off as worthless as an example of the "increasingly very real, and immediate" impact of climate change.
"Our goal is to better identify and measure the links between climate science and financial risk within the context of existing industry risk assessment frameworks," he said.
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