Climate & ESG Risk

Domain ID	D12
Owner	Chief Risk Officer
Jurisdiction	NZ + AU
Applicability	Platform — Climate risk is delivered primarily through SD06 (Risk Platform): MOD-152 provides physical risk assessment for mortgage collateral, transition risk portfolio analysis, climate stress scenarios, and automated TCFD disclosure generation. The NZ Climate-related Disclosures Act 2021 applies to NZ-licensed institutions from FY2023; APRA CPG 229 sets AU supervisory expectations. This domain is built to known consultation requirements; CLQ-007 and REP-012 will be updated when binding standards are finalised.

Domain scope

Climate and ESG risk for a deposit-taking institution covers three dimensions: (a) Physical risk — the impact of acute and chronic physical climate events (floods, wildfires, cyclones, sea-level rise) on borrower creditworthiness, collateral values, and operational continuity; (b) Transition risk — the financial impact of the transition to a low-carbon economy through policy change, technology shifts, and market repricing of carbon-intensive assets, affecting counterparty credit quality and the value of high-emissions-intensity lending exposures; (c) ESG dimensions — governance and social sustainability factors that affect the institution's regulatory standing, access to capital markets, and long-term viability.

NZ regulatory context

The Climate-related Disclosures (CRD) Act 2021 (amendment to the Financial Markets Conduct Act 2013) mandates TCFD-aligned annual climate disclosures for NZ financial institutions above the threshold, effective from FY2023. In-scope entities must report on governance of climate risk, strategy, risk management, and climate metrics and targets. The RBNZ conducted a climate stress test of major NZ banks in 2022 and has signalled continued supervisory focus on climate risk. The NZ Deposit Takers Act 2023 does not yet include specific climate risk prudential standards, but RBNZ supervisory expectations make climate risk governance a practical licensing requirement.

AU regulatory context

APRA CPG 229 (Climate Change Financial Risks, 2021) sets out APRA's supervisory expectations for managing climate risk within existing risk frameworks. ADIs are expected to assess their exposure to physical and transition risk, incorporate climate risk into their ICAAP and stress testing, and develop appropriate board governance. ASIC has published guidance on climate disclosure obligations under the Corporations Act 2001. APRA is developing mandatory climate risk prudential standards (CPS 229 is expected to follow CPG 229 as a binding standard).

Platform delivery

The platform integrates climate risk into the existing risk architecture without a separate tool or manual process: physical risk via property hazard API integration (MOD-152), transition risk via sector classification against CDD profiles (MOD-010 + MOD-152), climate stress scenarios extending the existing stress testing engine (MOD-034), and TCFD disclosure auto-generated from live model outputs (MOD-152). Climate risk indicators feed the Risk Appetite Framework dashboard (MOD-150). Manual climate risk assessments are eliminated.

Evolution

The NZ CRD Act Disclosure Standard will be further developed; APRA CPS 229 as a binding standard is expected. CLQ-007 and REP-012 will be updated when those standards are finalised. Template and scenario updates in MOD-152 are delivered as platform updates without requiring schema migrations.

Policies in this domain

Code	Title	Status	Owner
CLQ-007	Climate Risk Management Policy	Draft	Chief Risk Officer
REP-012	TCFD Climate Disclosure Policy	Draft	Chief Risk Officer

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Compiled 2026-05-22 from source/entities/risk-domains/D12.yaml