Climate Risk Disclosure – financial institutions feel the heat

by Sharanjit Paddam and Stephanie Wong


Climate change raises real risks and opportunities for financial institutions which need to be identified, managed and disclosed. In this issue, two senior actuaries recommend an eight-point strategy to address climate change. 

Key points

  • Australian institutions are ill-prepared for the impact of rising temperatures and extreme weather events and the effect these will have on their balance sheets.
  • Banks and general insurers have acute and long-term exposures and many Australian financial institutions have yet to understand the scope of the risk and their opportunity.
  • The impact across industries of rising temperatures and an increase in floods, bush fires and cyclones, are likely to result in acute physical risk to property.
  • There is a legal risk for financial institutions if there is a finding in favour of shareholder action over inadequate disclosure of climate change risks.
  • The transition to low carbon energy presents both risks and opportunities for financial institutions, investors and workers.

The Dialogue is a series of papers written by actuaries and published by the Actuaries Institute. The papers aim to stimulate discussion on important emerging issues. The opinions expressed in this paper are those of the author and do not necessarily represent those of either the Institute of Actuaries of Australia (the ‘Institute’), its members, directors, officers, employees, agents, or that of the employers of the author