of climate-related disclosures for insurers, asset owners and banks, consistent with the TCFD
on approaches, methods, assumptions, and data for estimating future costs that are disclosed
of climate science, impacts on extreme events and data requirements
The Task Force on Climate-related Financial Disclosures (TCFD), launched in 2015 by the Financial Stability Board, issued recommendations that companies assess and disclose their climate-related risks. Since that time, the expectation of disclosure has grown substantially. The Australian Government is now proposing compulsory disclosures for all large entities.
Internationally, standards for disclosure are being developed and Australian companies that operate globally will be expected to meet these standards. However, much of the guidance on how to assess and disclose climate-related risk is broad and lacks detail on regional climate variations.
There is a need for resources, guidance and support to build capability in Australia for disclosure, to ensure disclosure to contain locally relevant and accurate information that is consistent with global frameworks, and to build quality and consistency in the information that is being disclosed.
The CMSI has developed open-source technical business and scientific standards for climate physical risk projections of future repair and replacement costs of residential and commercial buildings and infrastructure in Australia.
CMSI appointed a finance committee, a science committee and an application committee. More than 120 industry experts participated in the development of the first reports.
The finance committee has published a guide for Australian banks, general insurers and asset owners, titled ‘Scenario analysis of climate-related physical risk for buildings and infrastructure: Financial disclosure guidelines’.
The science committee has published the report ‘Scenario analysis of climate-related physical risk for buildings and infrastructure: Climate science guidance’ is available here.
The application committee was formed to provide feedback on the practicality of the scientific and financial disclosure guidelines, and especially the completeness of the technical specifications for scenarios.
These voluntary standards are:
Following the release of the Intergovernmental Panel on Climate Change (IPCC) 6th Assessment Report (AR6) in 2021-22, the CMSI commissioned the University of NSW to undertake a review of the implications for the CMSI climate science guidance of the AR6 and the Coupled Model Intercomparison Experiment phase 6 (CMIP6) that informs much of it.
This review aimed to review note where the guidance is consistent with AR6 and where it is not. It requested that the review provide recommendations of any adjustments to the guidance resulting from the new climate science information in AR6.
The results of this review are available as an addendum to the Climate science guidance here.
The review found that overall, the existing CMSI climate science guidance is consistent with the findings of the IPCC AR6. The report recommended minor changes to the climate scenario information to provide greater detail on average sea level rise, average annual rainfall and time in drought.
As an industry-led collaboration between insurers, banks, scientists, regulators, reporting standard professionals, service providers and supporting parties, the Climate Measurement Standards Initiative (CMSI) builds confidence in the quality of climate-related risk disclosures. The project integrates the disciplines of climate science, hazard science, catastrophe modelling and financial modelling to provide forums, research and open-source resources (guidance, training, fact sheets, etc), that support a consistent Australian framework for financial sector climate risk analysis and disclosure aligned with international practice.
The initiative is being coordinated by a steering group led by Climate-KIC Australia, the National Environmental Science Program, Earth Systems and Climate Change Hub and a group of industry partners, these include QBE, Suncorp, IAG, RACQ, National Australia Bank, Westpac, Commonwealth Bank of Australia, HSBC Australia, Munich-Re, Swiss-Re, Leadenhall CP, MinterEllison and Investor Group on Climate Change. Technical support has been provided by the Institute for Sustainable Futures, UTS.