The Office of the Superintendent of Financial Institutions (OSFI) has released the final version of the Standardized Climate Scenario Exercise (SCSE), a comprehensive tool to evaluate financial institutions' exposure to climate risks.
The SCSE is expected to play a crucial role in helping OSFI and financial institutions assess potential vulnerabilities related to climate change. This will allow institutions to better prepare for future challenges. The exercise will also enhance institutions’ capacity to conduct climate scenario analysis and perform more thorough risk assessments.
In collaboration with the Autorité des marchés financiers (AMF) in Quebec, OSFI will expand the number of financial institutions participating in the exercise, increasing the scope and type of data available for analysis.
Peter Routledge, Superintendent of Financial Institutions, highlighted the importance of this initiative, stating, "This is the result of over 18 months of planning and consultation. The SCSE will advance climate risk management practices across financial institutions."
The final version of the SCSE reflected feedback from a two-phase public consultation that began in the fall of 2023, involving over 350 participants. The exercise is designed to help financial institutions and regulators gather the data necessary to mitigate climate-related risks while maintaining system stability. Financial institutions will submit their results by December 13 for credit and market risk modules, and by January 24, 2025, for flood and wildfire risk assessments, along with a transition risk exposure assessment and questionnaire.
OSFI and the AMF will analyze the data, with results expected to be published in the spring of 2025. The initiative is expected to deepen understanding of how climate-related risks could impact institutions and the financial sector.
Routledge emphasized the importance of this collaboration, as it helps financial institutions manage the systemic impacts of climate-related risks. Yves Ouellet, president and CEO of the AMF, expressed optimism about the collaboration, stating, "This harmonized approach will provide robust support for financial institutions."