Canada’s Office of the Superintendent of Financial Institutions (OSFI) has published a draft of its Standardised Climate Scenario Exercise (SCSE) methodology for public consultation. The SCSE initiative aims to enhance understanding of climate-related risks within federally regulated financial institutions (FRFIs), empowering them to conduct comprehensive climate scenario analyses and risk assessments. Additionally, it will furnish OSFI with a standardised quantitative evaluation of climate-related risks across various FRFIs, promoting consistency and comparability. “The adoption of sound climate risk management practices at financial institutions will give OSFI confidence that those institutions have the necessary policies and procedures in place to manage financial risks,” said Peter Routledge, Superintendent of Financial Institutions at the OSFI. The increasing significance of climate-related risks and the global response to mitigate these threats hold the potential to exert prudential influences on FRFIs, said the OSFI, potentially impacting the stability and integrity of the broader financial system. SCSE is a “pivotal step” towards strengthening climate risk management, enabling OSFI to encourage the implementation of risk management policies and procedures, which will help control and mitigate financial risks effectively. While foreign bank branches and federally regulated pension plans are not directly subject to the SCSE, they are actively encouraged to participate in the consultation process, the OSFI said. The consultation period extends until 22 December 2023.