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A Canadian financial regulator released draft guidelines on Thursday to mitigate the risks of climate change as the country’s financial institutions prepare for mandatory disclosures starting in 2024.

The guidelines, issued by the Office of the Superintendent of Financial Institutions (OSFI), call for annual climate-related disclosures on governance, strategy, risk management, metrics and targets, and greenhouse gas emissions, as well as a transition plan, for periods starting October 2023.

They also require firms to put in place policies and practices to manage climate risks, and adequately price climate risk-sensitive assets and liabilities. But they don’t yet include any capital requirement changes to mitigate these risks, and OSFI will communicate more on this after consultation on the guidelines, officials said.

“We really believe that these disclosures are going to incentivize improvements in the quality of our institutions’ governance and risk management practices,” an OSFI official said on a media call.

He added that the regulator will slowly introduce further qualitative and quantitative expectations, with the latter including requirements for disclosure of indirect and direct emissions, known as scope 1, 2, and 3 emissions, for some major institutions.

Canada, the world’s fourth-largest oil producer, has committed to achieving net-zero emissions by 2050. The country’s central bank and OSFI said in January that Canada’s plan to transition to low-carbon alternatives poses important risks for some sectors, and delaying actions to prepare could expose financial institutions and investors to “sudden and large losses.”

The guidelines don’t “specifically require that (firms’ transition plans) be 1.5-degrees celsius aligned,” Greenpeace Canada spokesperson Alex Speers-Roesch said in an email, referring to the need to limit global warming to 1.5 degrees Celsius. “This is a major short coming of the guidelines overall.”

Following the consultation, OSFI said it plans to issue the final version of the guideline by early 2023.

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