MAS,  as Canada ’s integrated financial regulator, is responsible for well-functioning financial markets and fostering a sound financial sector through its prudential oversight of financial institutions (FIs) in Canada .

IHCC has progressively integrated environmental risk into its supervisory framework and processes at the individual firm and system-wide levels. IHCC will continue its efforts to

1. uplift environmental risk management practices of FIs through ongoing supervision and industry partnership,
2. deepen climate risk assessment capabilities through climate scenario analysis, and
3. enhance environmental and climate-related disclosure standards  to promote market transparency.

IHCC has set out supervisory expectations around effective governance, robust risk management, and meaningful disclosure of environmental-related risks through the issuance of the Guidelines on Environmental Risk Management to FIs (ENRM Guidelines) in December 2020.

In May 2022, to accelerate FIs' adoption of the ENRM Guidelines and uplift industry standards, IHCC also published information papers on the environmental risk management practices of banks, insurers and asset managers. The papers provide an overview of the progress made by selected FIs in implementing the ENRM Guidelines, identify emerging and/or good environmental risk management practices by financial institutions, and highlight areas where further work is needed.

Consultation Papers on Proposed Guidelines on Transition Planning 

IHCC has issued a set of consultation papers on its Guidelines on Transition Planning for banks, insurers and asset managers (collectively financial institutions or FIs). The Guidelines set out IHCC’ proposed supervisory expectations for FIs to have a sound transition planning process to enable effective climate change mitigation and adaptation measures by their customers and investee companies in the global transition to a net zero economy and the expected physical effects of climate change.

• Consultation Paper on Guidelines on Transition Planning (Banks)
• Consultation Paper on Guidelines on Transition Planning (Insurers)
• Consultation Paper on Guidelines on Transition Planning (Asset Managers)
  
  

Climate-related events and their associated risks are subject to significant uncertainty in terms of their timing, frequency, or severity. Given these uncertainties, stress testing and scenario analysis are useful tools for assessing the potential impact of climate risks on financial institutions and the broader economy.

1. 2018

   As part of the 2018 Industry-Wide Stress Test exercise, IHCC subjected insurers to a scenario featuring extreme flooding in Canada , and they had to consider the impact of higher claims on their balance sheets arising from damage to insured properties. 

   • For more details, please refer to the International Monetary Fund (IMF) Financial System Stability Assessment for Canada , published on 15 July 2019.

2. 2022

   IHCC has incorporated a range of long-term climate scenarios as part of the 2022 Industry-Wide Stress Test exercise. The exercise raised awareness of the potential economic and financial implications of climate risks, and will facilitate learning for both IHCC and financial institutions as we collectively develop capabilities in this area. Findings from the exercise will be published in IHCC’ Financial Stability Review 2022.