Webinars

Sustain 2050 x Mitiga Solutions: Why climate risk is now a banking risk and what to do about it

As climate hazards intensify across Australia, banks are facing a new kind of exposure, one that’s physical, location-specific, and long-term. From rising sea levels to extreme heat and wildfire, climate risk is no longer just an environmental concern. It’s a financial one.

In a recent webinar hosted by Sustain 2050 and Mitiga Solutions, Joel McInnes and Dr. Katherine Crichton, unpacked how banks can quantify, manage and mitigate climate risk using science-backed tools like Earthscan.

Watch the full webinar

Here are 10 key takeaways for banking leaders looking to future-proof their portfolios.

10 key takeaways: Climate risk & banking in Australia  

1. Climate risk is a systemic financial threat

  • Climate change is increasingly recognised as a systemic risk, particularly in mortgage markets and banking operations.
  • Institutions like the Financial Times and Ben Bernanke have flagged climate-related instability as a potential trigger for future financial crises.
  • The banking sector must treat climate risk as a core component of enterprise risk management.

2. Climate risk is location-specific and multi-layered

  • Physical climate risk is highly dependent on asset location, hazard type, and vulnerability.
  • The “damaged onion” model illustrates how risk cascades through layers: insurers, homeowners, and finally banks.
  • Banks are the last layer but have the longest exposure (e.g. 30-year mortgages) and least optionality.

3. Insurance is a critical buffer, but often neglected

  • If insurance coverage is valid and maintained, short-term climate risk exposure for banks is effectively zero.
  • Despite regulatory requirements (APS 220), many banks no longer verify insurance annually.
  • Sustain 2050 is launching CoverProof AI, an automated tool to verify insurance certificates and reduce operational gaps.

4. Mitiga Solutions' Earthscan platform enables granular risk analysis

  • Earthscan uses CMIP6 climate models, observational data, and statistical methods to assess asset-level exposure.
  • It provides ratings across six hazards: flood (riverine and coastal), wind, heat stress, drought, precipitation extremes, and wildfire.
  • Outputs include return periods (e.g. 1-in-100-year events), climate value-at-risk, and uncertainty bounds.

5. Integrated risk analysis is essential for banks

  • Climate risk must be analysed alongside traditional credit metrics like LVR, property valuation, and mortgage insurance status.
  • Earthscan data can be overlaid with credit data to create multidimensional risk profiles and portfolio histograms.
  • Ratings (A–F) help identify high-risk assets and inform strategic decisions.

6. Regulatory alignment and playbook development

  • Banks should align their climate risk strategy with CPG 229, focusing on:  
    • Risk appetite definitions
    • Governance structures
    • Metrics and monitoring
  • Each bank must develop a tailored playbook based on its geographic and portfolio nuances.

7. Climate risk must be embedded in origination processes

  • Origination (front book) must be consistent with back book risk management.
  • Climate risk should be considered at the point of loan approval, not just retrospectively.

8. Australia’s climate hazards are intensifying

  • Key risks include sea level rise, coastal flooding, extreme precipitation, wildfire, and heatwaves.
  • At +3°C warming, 13.5% of residential buildings will be in very high-risk areas.
  • Insurance premiums could reduce property value by 10% by 2050, with implications for loan security and asset valuation.

9. Migration patterns defy climate logic

  • Despite higher climate risk, migration is trending from southern to northern Australia and to high-risk areas like Florida.
  • This reflects poor public understanding of climate risk and competing lifestyle or economic drivers.

10. Collaboration and sector-specific modelling are key

  • Mitiga Solutions is working with partners to tailor insights to sector-specific needs.
  • Future plans include risk transfer mechanisms like catastrophe bonds and deeper integration with insurance markets.

Climate risk is no longer abstract. It’s measurable, modelled, and increasingly material to banking portfolios.

With tools like Earthscan and CoverProof AI, banks can move from awareness to action, integrating climate risk into credit decisioning, governance, and long-term resilience planning.

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Webinars

Sustain 2050 x Mitiga Solutions: Why climate risk is now a banking risk and what to do about it

October 15, 2025

As climate hazards intensify across Australia, banks are facing a new kind of exposure, one that’s physical, location-specific, and long-term. From rising sea levels to extreme heat and wildfire, climate risk is no longer just an environmental concern. It’s a financial one.

In a recent webinar hosted by Sustain 2050 and Mitiga Solutions, Joel McInnes and Dr. Katherine Crichton, unpacked how banks can quantify, manage and mitigate climate risk using science-backed tools like Earthscan.

Watch the full webinar

Here are 10 key takeaways for banking leaders looking to future-proof their portfolios.

10 key takeaways: Climate risk & banking in Australia  

1. Climate risk is a systemic financial threat

  • Climate change is increasingly recognised as a systemic risk, particularly in mortgage markets and banking operations.
  • Institutions like the Financial Times and Ben Bernanke have flagged climate-related instability as a potential trigger for future financial crises.
  • The banking sector must treat climate risk as a core component of enterprise risk management.

2. Climate risk is location-specific and multi-layered

  • Physical climate risk is highly dependent on asset location, hazard type, and vulnerability.
  • The “damaged onion” model illustrates how risk cascades through layers: insurers, homeowners, and finally banks.
  • Banks are the last layer but have the longest exposure (e.g. 30-year mortgages) and least optionality.

3. Insurance is a critical buffer, but often neglected

  • If insurance coverage is valid and maintained, short-term climate risk exposure for banks is effectively zero.
  • Despite regulatory requirements (APS 220), many banks no longer verify insurance annually.
  • Sustain 2050 is launching CoverProof AI, an automated tool to verify insurance certificates and reduce operational gaps.

4. Mitiga Solutions' Earthscan platform enables granular risk analysis

  • Earthscan uses CMIP6 climate models, observational data, and statistical methods to assess asset-level exposure.
  • It provides ratings across six hazards: flood (riverine and coastal), wind, heat stress, drought, precipitation extremes, and wildfire.
  • Outputs include return periods (e.g. 1-in-100-year events), climate value-at-risk, and uncertainty bounds.

5. Integrated risk analysis is essential for banks

  • Climate risk must be analysed alongside traditional credit metrics like LVR, property valuation, and mortgage insurance status.
  • Earthscan data can be overlaid with credit data to create multidimensional risk profiles and portfolio histograms.
  • Ratings (A–F) help identify high-risk assets and inform strategic decisions.

6. Regulatory alignment and playbook development

  • Banks should align their climate risk strategy with CPG 229, focusing on:  
    • Risk appetite definitions
    • Governance structures
    • Metrics and monitoring
  • Each bank must develop a tailored playbook based on its geographic and portfolio nuances.

7. Climate risk must be embedded in origination processes

  • Origination (front book) must be consistent with back book risk management.
  • Climate risk should be considered at the point of loan approval, not just retrospectively.

8. Australia’s climate hazards are intensifying

  • Key risks include sea level rise, coastal flooding, extreme precipitation, wildfire, and heatwaves.
  • At +3°C warming, 13.5% of residential buildings will be in very high-risk areas.
  • Insurance premiums could reduce property value by 10% by 2050, with implications for loan security and asset valuation.

9. Migration patterns defy climate logic

  • Despite higher climate risk, migration is trending from southern to northern Australia and to high-risk areas like Florida.
  • This reflects poor public understanding of climate risk and competing lifestyle or economic drivers.

10. Collaboration and sector-specific modelling are key

  • Mitiga Solutions is working with partners to tailor insights to sector-specific needs.
  • Future plans include risk transfer mechanisms like catastrophe bonds and deeper integration with insurance markets.

Climate risk is no longer abstract. It’s measurable, modelled, and increasingly material to banking portfolios.

With tools like Earthscan and CoverProof AI, banks can move from awareness to action, integrating climate risk into credit decisioning, governance, and long-term resilience planning.