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Guidelines on Climate-related and Environmental Financial Risk Management

Bank of Mauritius has published guidelines on Climate-related and Environmental Financial Risk Management and this means that financial institutions must embed climate-related risks within their risk management frameworks.

Browse through the milestones and how we can accompany your compliance journey.

At PwC, we believe that sustainability and climate change should be at the heart of every business. The effects of climate change and the transition to a low carbon economy are already having a significant impact on the Financial Services sector, and it has become an imperative to assess and manage climate-related and environmental risks that may impair or strand assets. 

Likewise, an increasing a number of regulators globally that have started to react to the threat that climate-related and environmental risks are posing to global financial stability.

In line with this same philosophy, the Bank of Mauritius (BoM) has published guidelines intended to assist local financial institutions in embedding sound governance and risk management frameworks for climate-related and environmental financial risks within their existing risk management frameworks.

Our 2022 CEO survey found that globally 33% of CEOs believe climate change is a threat to their organisation. For financial institutions, pressure to act is coming from different directions.


Now published:

The Guideline on Climate-related and Environmental Financial Risk Management

The Guideline on Climate-related and Environmental Financial Risk Management is now finalised by the Bank of Mauritius (BoM) and has been made effective as of 01 April 2022. The immediate challenge for the regulated institutions under BoM is to define a roadmap and put a policy framework in place by 30 September 2022.
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Bank of Mauritius draft guidelines on Climate-related and Environmental Financial Risk Management

The urgency to act now

​As per the timelines in the published guidelines, the clock has already started ticking and Financial Institutions need to start taking action. 

Bank of Mauritius Framework

In line with this same philosophy, the Bank of Mauritius (BoM) published guideline that is intended to assist financial institutions in embedding sound governance and risk management frameworks for climate-related and environmental financial risks within their existing risk management frameworks.

How we can help you on this journey

We have supported clients in several jurisdictions that have already introduced climate risk guidelines. The combination of our global network capabilities with our deep understanding of the local market makes PwC well-equipped to guide you in this journey.

Governance

We can assist you in creating the right level of awareness about climate-related risks from Board level downward. It is paramount to discharge the climate risk responsibility to the appropriate levels of disclosures as per the guidelines.

Common challenges

  • Acknowledging the need for training across levels
  • How climate risk can/should be addressed across the organization structure
  • Understanding how to discharge climate risk responsibility

How we can help

  • We can help you create a climate risk programme and perform peer assessment
  • We can assist in defining appropriate roles and responsibilities to address climate-related risks
  • We can accompany you in your climate risk governance review
  • Climate-risk training for all management and functions impacted by climate risk/change
  • Definining your ambition, awareness, perceptions and positioning 
  • We can help you in reviewing the conduct, culture and remuneration practices

 

Risk management

We can help you with the identification of distinct elements of climate risks within each business line. Those risks should be integrated with the various risk profiles and categories using tools and techniques like stress testing.

Common challenges

  • Understanding the distinctive risks of climate change to the business
  • Creating an appropriate response to climate risk exposures
  • Metrics misaligned to strategy and risk appetite

How we can help

  • We can help in risk identification, measurement and monitoring
  • We can help you develop heatmaps for climate risk prioritisation and mitigation
  • We can accompany you in your risk management integration (operational risk, credit risk, market risk etc.) including policies
  • We can create your risk modeling – including credit grading, stress testing, valuations, volatility etc.
  • We can help in managing end to end disclosures including set up and monitoring of appropriate risk KPIs 

Strategy

​PwC can guide you in defining your risk appetite, scenario analysis and incorporation of climate-related risks into the broader agenda of Net zero transition.

Common challenges

  • Considering multiple scenarios over multiple timescales
  • Handling scale of data for forward looking information 
  • Determining when and how to pivot strategy to best manage risks and opportunities

How we can help

  • We can support you in physical and transition risk scenario analysis
  • We provide ICAAP/ILAAP support
  • We can assist in data identification and sourcing and manage data challenges
  • We help you nurture risk appetite and analyse the impact on overall business model
  • We provide advise on climate risk as part of wider Net Zero strategy
  • We can guide you on new product development with ESG features

End-to-end process transformation

All this needs to go with adapting and transforming your operating model so as to incorporate climate risk parameters. We can also assist with this transformation.

Common challenges

  • Understanding the right questions to ask counterparties
  • Considering the effects and actions needed on legacy transactions/loans
  • Adapting operating models to incorporate new activities

How we can help

  • We can help you manage and monitor end-to-end climate risk incorporation
  • We can help you re-engineer processes at product level to incorporate climate risk parameters
  • We can assist in legacy business considerations – manage, hedge, exit. 
  • We can guide you in the enhancement of pricing and credit grading processes to incorporate climate factors.
  • We can help you enhance your credit delivery operating model
  • We can assist you in acquiring tools and model infrastructure: data capture, storage and reporting

Disclosures for Governance, Risk Management, and Strategy

Managing Disclosures is a critical element in the whole exercise and cuts across all the four pillars. PwC can assist in developing your overall disclosure strategy, while putting in place an effective monitoring and evaluation framework against the identified KPIs related to climate risk. 

We can support with:

  • Annual disclosure strategy based on global frameworks like TCFD
  • Disclosure to cover aspects of governance, risk management and strategy towards climate-related risk
  • Identification, measurement and continuous measurement of key  risk indicators

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Contact us

Julien Tyack

Julien Tyack

Partner, Risk Assurance Services, PwC Mauritius

Tel: +230 404 5210

Vikas Sharma

Vikas Sharma

Partner, Cybersecurity & Privacy, PwC Mauritius

Tel: +230 404 5015

Anish Chandra

Anish Chandra

Associate Director, ESG & Sustainability, PwC Mauritius

Tel: +230 404 5430

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