On September 11, 2025, the Autorité des marchés financiers (AMF), Quebec’s financial markets regulator, and the Office of the Superintendent of Financial Institutions (OSFI) jointly published a report titled Strengthening Climate Risk Financial Resilience (Report). The Report sets out the findings of both regulators following the results of the Standardized Climate Scenario Exercise (SCSE).
The SCSE, a joint initiative between the AMF and OSFI, was conducted during the 2024–2025 financial year. The SCSE aimed to assess the physical and transition risks related to climate change within the Canadian financial system. Using standardized scenarios developed by the regulators, participating institutions were required to apply these scenarios to their portfolios to identify weaknesses and test resilience under climate stress scenarios. More than 250 financial institutions participated, including banks, insurers and asset managers.
The objectives were to improve the financial sector's understanding of climate-related financial risks, promote the development of climate risk assessment capabilities and provide a standardized, comparable perspective on physical and transition risks to all financial institutions. This bulletin will highlight the main issues raised in the report.
Issue 1: Lack of Reliable Climate Data
The Report highlights significant limitations regarding climate data, both in terms of availability and reliability. Financial institutions often had to work with incomplete, inconsistent or third-party data, which was difficult to validate. These data gaps limited the scope and accuracy of their risk analyses. This underscores the need to improve the quality and consistency of data to support effective climate risk evaluation and informed risk management decision-making.
The Report indicates that financial institutions will need to make strategic investments in climate-related data and data infrastructure to assess and manage climate risks with greater accuracy.
Issue 2: Increasing Physical Risks
The Report notes that the lack of data related to physical climate risks could pose a long-term challenge for financial institutions. Physical risks refer to financial losses or disruptions caused by extreme weather events or the gradual effects of climate change, including the increased risk of flooding and wildfires.
The increased risk of flooding is used as an example in the Report, concluding that financial institutions lack access to floodplain maps and information on insurance coverage for buildings located in high-risk areas. This prevents financial institutions from adequately assessing whether such properties in these locations will lose market value or be rendered total losses in the event of a flood.
In addition, the Report notes that buildings at risk of repeated or severe flooding may become uninsurable, potentially making them ineligible for mortgage financing. The Report raises the possibility that this situation could have systemic implications if such risks are concentrated in vulnerable areas or impact an institution's balance sheet.
Issue 3: Transition Risk Uncertainty
The Report also assesses the capacity of financial institutions to manage transition risks. Transition risks refer to the financial stresses that arise due to changes in climate policies, market sentiment or technological shifts associated with the transition to a green economy.
Findings predict that expected credit losses against the lifetime value of an asset across all industries vulnerable to transition risk will increase by 73%, with losses concentrated in industries tied to fossil fuels.
The Report recommends that financial institutions evaluate transition risk specific to each counterparty in their transactions, assessing their greenhouse gas emissions, energy use and climate transition strategy. Once again, the Report highlights the lack of reliable data as a significant barrier to this approach.
Conclusion and Next Steps
The AMF and OSFI have indicated that the results from the SCSE will be considered in future revisions to their respective environmental risk guidelines, namely OSFI's Guideline B-15, Climate Risk Management, and the AMF's Climate Risk Management Guideline (Guidelines).
The SCSE results highlight significant challenges regarding the availability, comparability and reliability of climate-related data within Canadian financial institutions. The AMF and OSFI may address these challenges by incorporating more prescriptive standards on climate data governance into the Guidelines, including minimum requirements for data granularity and data quality.
For more information, please contact the authors or any member of our Financial Services Regulatory group.
