Regulator appoints first head of climate risk

The Australian Prudential Regulation Authority (APRA) has hired Graham Sinden as head of climate risk.

Sinden is APRA's first head of climate risk and started in the role on Monday 15 October, according to an APRA spokesperson. He comes to APRA from EY, where he was a director in the climate and sustainability practice, working for public and private sector clients on climate risk, renewable energy, energy efficiency and sustainable finance.

Prior to that, he was executive director of Climate Strategies, and senior strategy manager at Carbon Trust, both in London. Previous employers also included the University of Oxford, the NSW Office of Environment and Heritage and the UN High Commissioner for Refugees, according to Sinden's LinkedIn profile.

Per the job advertisement placed online in May, Sinden will "form and lead a team responsible for providing expert advice in the area of climate risk," and "play a lead role in ensuring regulated entities manage the financial risks of a changing climate." Currently, Sinden has one dedicated staff member to support him in the climate risk team, APRA confirmed.

Sinden will be involved in APRA's development of a vulnerability assessment for climate risk and will also be involved in the ongoing work to develop prudential guidance around managing climate risk, the spokesperson told FS Sustainability. He will also participate in APRA's review of Prudential Practice Guide SPG 530 Investment Governance (SPG 530), but will not have oversight of that process, which is being led by APRA's Policy Division. APRA is currently reviewing SPG 530 in in relation to ESG considerations for super funds.

APRA's focus on the financial risks of climate change has steadily increased in recent years.

In 2017, Geoff Summerhayes, APRA executive board member, made a landmark speech in which he emphasised "[s]ome climate risks are distinctly 'financial' in nature. Many of these risks are foreseeable, material and actionable now. Climate risks also have potential system-wide implications that APRA and other regulators here and abroad are paying much closer attention," and said that APRA-regulated entities should conduct stress testing for "organisational and systemic resilience in the face of adverse shocks" from climate risk.

In February 2020, APRA released a letter to all APRA-regulated entities entitled "Understanding and managing the financial risks of climate change", in which APRA outlined that they would develop on a climate change financial risk prudential practice guide (PPG) to assist entities in complying with existing prudential requirements.

"The guidance will be informed by APRA's engagement with other regulators domestically and internationally, as well as its ongoing engagement with industry participants," APRA noted, and said at the time that the guide would be put out mid-2020 and seek to publish final guidance before the end of the year.

In the February letter, APRA also cited its 2018 climate change survey, which, among other things, "highlighted the need to address the climate data deficit, to quantify the likely impact of the physical, transitional and liability risks of climate change and accurately assess and appropriately price these risks." APRA recommends that the data needs to be derived through scenario analysis, stress testing and disclosure of market-useful information.

"Effective action now on these fronts will promote strong understanding and management of the potential financial impacts of a changing climate on current and future business prospects, allowing well-managed entities to minimise costs and optimise benefits," APRA said in the February letter.

APRA is not prescriptive of the reporting frameworks that regulated entities should use, but rather encourages the adoption of voluntary frameworks such as the Financial Stability Board's Task Force on Climate-related Financial Disclosures (TCFD) recommendations.

Read more: Graham SindenAustralian Prudential Regulation Authority
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