Canada’s solvency regulator is seeking to harmonize climate risk disclosures with international standards, which some Canadian P&C insurers are viewing as akin to a climate-related IFRS 17 initiative.
Some contend OSFI’s forthcoming guidance on harmonizing companies’ climate-related risk disclosures with international standards won’t be onerous for many companies, since many are already on the path toward thinking about this. But some P&C insurance company executives say otherwise.
OSFI is collecting public comments on how to implement recommendations by the Task Force on Climate-related Disclosure — established by the G20’s Financial Stability Board (FSB) — to achieve a global standard for insurance and other companies to assess and disclose climate-related risks and opportunities.
Manifest Climate is a consultant on helping companies to achieve climate change solutions. Its founder told delegates attending the NICC 2022 Conference in Halifax that many companies are already thinking about what’s required to develop global climate-related reporting standards.
“Our research shows that most organizations have more compliance with [recommendations] than they know — they just haven’t put that lens on,” Manifest Climate co-founder and CEO Laura Zizzo told delegates attending the 2022 NICC Conference.
“You’re managing your business,” Zizzo said “This is real stuff that you’re doing, and [OSFI] is not asking you to do anything new, per se — maybe scenario analysis. But it just talking about how you’re already managing this risk that we all know is here. It’s just [about] consistency over time from a global perspective. That is the first step of the regulatory process.”
But P&C insurance companies have seen this movie before, when global regulators attempted to harmonize international reporting standards for financial disclosures. That experience took a lot of time and money, and it would be dishonest to say the same wouldn’t be the same of harmonized climate-related reporting, P&C insurance executives say.
“It is complex, and it requires resources and costs,” said NICC panellist Dr. Michael Menhart, chief economist and head of economics, sustainability and public affairs at Munich Re. “It would be nice if I could sit here after all the experiences we have [had], and say, ‘Don’t worry, this is a side product of what you are reporting anyway.’ No, this is not at all the case…
“This isn’t a [matter] of climate convictions…You must have systems in place that tell you what the emissions [are that] you’re insuring. And what are the findings of the emissions in your portfolio? That is what you need at the very end.
“I [can’t] sit here and say, ‘Don’t worry, that doesn’t mean efforts and costs.’ It means efforts and costs. That’s why, to be honest, my advice to everybody who has not yet undergone this process is to actually not wait for regulation. Start thinking about what are the environmental social and governance KPIs.”
OSFI made it clear at the NICC panel that investors, not regulators, are driving the move towards harmonized climate-related disclosure.
“A lot of our banks and insurance companies are [volunteering] to make disclosures right now without having regulation forcing them to do it,” observed Javinder Sidhu, OSFI’s director of climate analytics at OSFI. “It’s their own voluntary commitment. So, it’s market pressure driving some of this disclosure. And it’s just going to enhance over time. It’s starting to emerge right now based on public disclosures that are available as of just May of 2022.”
Feature photo courtesy of iStock.com/RenatoPMeireles