Toronto-based Riskthinking.AI has been chosen by the Office of the Superintendent of Financial Institutions (OSFI) to provide climate risk data for financial institutions (FIs) that are required to complete the 2024 Standardized Climate Scenario Exercise (SCSE).
The SCSE is an initiative aimed at increasing FIs’ understanding of climate-related risks, building their capacity to conduct climate-related analyses and risk assessments, and measuring institutions’ potential financial exposures to climate risks.
“It’s the latest example of our data and analytics platform helping model climate risk.”
The SCSE is being run in collaboration with the OSFI, which oversees federally regulated FIs and pension plans, and L’Autorité des marchés financiers (AMF), which regulates Québec’s financial markets.
Founded in 2019, Riskthinking.AI is a data company that offers advanced analytics specifically focused on climate risk. The company recently unveiled its Climate Earth Digital Twin (CDT) platform, which allows institutions to simulate the future impact of climate change worldwide on any aspect of its business, including physical asset data.
Through this initiative, Riskthinking.AI is making flood risk analytics from its CDT platform available through a portal. Representatives from each of the participating FIs can then access the data required to complete the scenario analysis exercise.
“As a Toronto-based company, we’re very honoured to be aligned with OSFI and AMF, to participate in the SCSE and ultimately help Canadian financial institutions become resilient to climate change,” Riskthinking.AI founder and CEO Ron Dembo said in a statement. “It’s the latest example of our data and analytics platform helping model climate risk.”
In October 2023, the OSFI published a draft of the SCSE methodology and launched a two-part consultation process to prepare for the execution of the exercise this year. The second part of its consultation process began today and will run until June.
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“Financial institutions are exposed to the consequences of climate change,” AMF president and CEO Yves Ouellet said in a statement. “The joint exercise we are launching today with our OSFI colleagues will help institutions be better prepared to manage climate change risks. It will also enable us to take the necessary actions to support financial market stability and the protection of Québec consumers.”
Around the world, regulators are beginning to roll out new rules related to how FIs and public companies are managing climate risk. Last month, the US Securities and Exchange Commission adopted rules to standardize climate-related disclosures by public companies and in public offerings.
Some companies around the world are also facing legal action for their climate risk strategies. In 2023, directors of Shell were sued in the United Kingdom for failing to adequately prepare their company for the net-zero transition.
The information collected through the SCSE will be used to enable regulators to assess and compare FIs’ exposure to climate risks and ensure financial market stability.
Feature image courtesy Unsplash. Photo by Annie Spratt.
