Climate change already poses significant financial risks and can no longer be viewed as a purely ethical, environmental or long-term issue, a board member of Australia's financial regulator says.
The Australian Prudential Regulation Authority's Geoff Summerhayes told an Insurance Council of Australia Annual Forum in Sydney on Friday that APRA is considering widespread testing of financial systems for signs of stress due to climate change.
"While climate risks have been broadly recognised, they have often been seen as a future problem or a non-financial problem," Mr Summerhayes said
"Some climate risks are distinctly financial in nature. Many of these risks are foreseeable, material and actionable now."
Mr Summerhayes said the Financial Stability Board's Taskforce on Climate-Related Financial Disclosures report - released in December - should help investors, lenders and insurance underwriters improve climate-related disclosure, and that APRA could look at climate risks as part of its own stress testing.
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"If entities' internal risk management processes are not starting to include climate risk as something that has to be considered - even if risks are ultimately judged to be minimal or manageable - that seems a pretty reasonable indicator there might be something wrong with the process," Mr Summerhayes said.
"Similarly, if you're an investor and you're not already asking questions about how the companies you invest in approach these issues - perhaps you should be."
