Risk Management

Climate-Related Risks

The Society optimizes its ERM resources by prioritizing risks based on their likelihood and severity of potential harm. Given the Society’s risk profile and exposure to climate-related risks (both physical and transition), the climate-related risks that have been identified and assessed through the RCSA program are viewed by the Society as “low” risks. As such, the Society monitors these risks through annual risk assessments.

While the Society has risk appetite statements, it does not have a climate-specific risk appetite statement. However, it should be noted that the Society will not tolerate risks that may jeopardize its long-term financial viability or involve issues associated with violations of the law in the U.S. or in Canada. This risk appetite extends to climate-related requirements as well.

Additionally, the Internal Audit Department is actively involved in the Society’s risk management process through the independent identification, testing, and assessment of the adequacy and effectiveness of controls. As part of its ongoing monitoring processes, the Society ensures its risk management process functions effectively on a continuing basis.

Climate-Related Scenario Analysis

Beginning in 2024, the Society incorporated climate transition risk into its Financial Condition Testing for its Canadian Branch. In 2025, the scenario that was tested assumed an immediate policy action toward limiting average global warming to below two degrees Celsius and was developed using the Bank of Canada and OSFI’s report from 2022 entitled “Using Scenario Analysis to Assess Climate Transition Risk” as guidance.

The results of the 2025 Financial Condition Testing deemed this scenario to not be material or adverse in terms of capital (i.e., LIMAT ratio) and profit and loss to the Society.

The Society will continue to perform climate-related scenario analysis on an annual basis.

Climate-Related Risks

Climate-Related Scenario Analysis

Climate-related financial disclosures