Australia's prudential regulator enters 2025 with its climate risk supervision framework in place, as mandatory climate-related financial disclosures for large entities commence under new federal legislation.
The regulator's Prudential Practice Guide CPG 229, which sets out expectations for how regulated institutions should identify, measure, manage and disclose climate-related financial risks, continued to underpin APRA's supervisory expectations throughout 2024. Under CPG 229, boards and senior management are expected to address climate risk through governance structures, scenario analysis and strategic planning.
CLIMATE VULNERABILITY ASSESSMENT
The Climate Vulnerability Assessment was launched in September 2021 with Australia's five largest banks, and its results were published in November 2022. The CVA exercises required participating institutions to model how their loan books and balance sheets could be affected under a range of climate scenarios, covering both physical risks — such as increased frequency of extreme weather events — and transition risks arising from the shift to a lower-carbon economy.
In November 2024, APRA published its 2024 Climate Risk Self-Assessment Survey, benchmarking regulated entities' practices against CPG 229.
MANDATORY CLIMATE DISCLOSURE
On 1 January 2025, mandatory climate-related financial reporting commenced for large entities under the Treasury Laws Amendment legislation, applying to financial years beginning on or after that date. The framework, which applies to entities meeting certain size thresholds, requires disclosures covering governance, strategy, risk management and climate-related metrics and targets — broadly aligned with the standards of the International Sustainability Standards Board.
Institutions will have to disclose climate information to investors and the market in a standardised format. APRA has said it will consult in 2025 on amending its risk management standards, CPS 220 and SPS 220, to include climate risk considerations.