During our webinar ‘How ESG-ready is your mutual bank’ , we provided some practical guidance on how to meet your ESG requirements particularly in the areas of climate change financial risks, climate risk stress testing and Reconciliation Action Plans (RAPs).
Reconciliation Action Plans (RAPs)
Shellee Murphy-Oates, KPMG Reconciliation Manager, a Ngiyampaa Wailwan and Darkinjung woman, shares the importance and impact of developing a RAP.
Reconciliation Action Plans (RAPs) assist organisations to embed the principles and purpose of reconciliation within its core operations. RAPs are highly relevant to mutual banks, with their deep involvement in Australian communities. KPMG have been on our reconciliation journey for 15 years and are passionate about doing our bit to ensure that everyone, in every community, has equal access to opportunity.
KPMG’s third ‘Elevate’ RAP was launched on 10 December 2022.
APRA CPG 229 Climate Change Financial Risks
James Spencer, Climate Change & Sustainability Services, explores the expectations of the regulator, some of the expected impacts as well as industry trends we have seen from our exiting reviews.
APRA finalised the Prudential Practice Guide CPG 229 Climate Change Financial Risks (CPG 229) in November 2021. The key objective of the guidance is to assist regulated entities comply with existing risk management and governance obligations. Mutuals should be thinking carefully about all levels of the organisation and ensuring governance, risk management, scenario analysis and disclosures are appropriate and effective for the complexity of your organisation.
Climate risk stress testing
Paul Lichtenstein, Partner – Financial Risk Management, discusses the benefits of this model for mutual banks.
KPMG can perform climate risk stress testing to quantify the impact of physical and transition risk scenarios on a lending portfolio’s credit and key financial metrics. The model is aligned to CPG 229 and the outcomes can assist mutuals in quantifying the impact of climate change on their portfolios, enhancing business strategies to reduce climate-related risks, develop Climate Risk Appetite Statements, or be used in TCFD disclosures.
How can KPMG help?
Some practical next steps on how KPMG can help to ensure your mutual bank is ESG-ready:
Many mutual banks play a very important role in their memberships’ communities (often regional, or sectoral and both with a major exposure to Indigenous People) which gives mutual banks a huge opportunity to engage with the community, whether you have remote or regional branches where there are higher population of Aboriginal or Torres Strait Islander people. Therefore, Reconciliation Action Plans (RAPs) should be top of the agenda for mutual banks. KPMG can provide advice to help you get started on developing your own RAP or to develop a cultural safety plan that assesses how culturally safe your organisation is and to put in place relevant training.
KPMG can conduct a review or assessment for your mutual bank to see how you comply with APRA’s CPG 229 Climate Change Financial Risks as well as against the peer landscape using the categories of physical risk, transition risk and liability risk and how these concepts are currently understood across the bank and identify a roadmap to closing any gaps.
KPMG can perform climate risk stress testing to quantify the impact of multiple physical and transition risk scenarios on a lending portfolio’s credit and key financial metrics. Our model leverages internationally accepted climate scenarios and has an adaptable methodology aligned to CPG 229. Importantly, the model uses Australian data and is calibrated for Australian conditions.
