Australia's central bank and banking regulator are taking the temperature of the financial vulnerability to climate change of the country's biggest lenders.
The Reserve Bank of Australia and the Australian Prudential Regulation Authority are conducting climate vulnerability assessments with the five largest banks.
They will look at how banks may adjust their business models in line with risks posed by climate change and the resulting transition as well as the economic consequences.
"The physical impact of climate change, and the global transition to a lower emissions economy, will affect economic output, prices and employment," APRA and the RBA said in a statement on Thursday.
"Climate change will be a driver of change in the value of certain assets and income streams, and therefore poses a risk to financial institutions and financial stability."
APRA plans to finalise this year guidance to financial entities it supervises about identifying, monitoring and managing risks related to climate.
The results of its vulnerability assessments with major banks are expected to be published in 2022.
