(Reuters) — Australia’s prudential regulator unveiled long-awaited guidance for banks, insurers and pension funds on managing and disclosing climate-related risks, including physical, transition and liability exposures.

Issuing a draft version for consultation, the Australian Prudential Regulation Authority (APRA) said the guidance paper did not create new requirements or obligations but gave more clarity about its expectations.

The guide was developed in consultation with peer regulators globally and is aligned with the recommendations from the global Task Force on Climate-related Financial Disclosure (TCFD), set up by the G20 rich countries to coordinate rules.

Chair Wayne Byres said in a statement that the guide doesn’t direct or prevent APRA-regulated entities from making particular business decisions but aims to ensure decisions are well-informed and consider “risks and opportunities that the transition to a low carbon economy creates.”

The paper states financial institutions must consider and report on their planning for mitigating the impacts of climate-related risks on a range of other risks including credit, market, operational, underwriting and reputational risks.

Management must also set clear lines of responsibilities in managing climate-related risks, and company boards must hold senior management to account for such responsibilities.

Material exposures should be monitored by company boards and senior management, the paper said, adding that it considers the TCFD framework to be a “sound basis” for disclosing information to stakeholders.

The Investor Group on Climate Change, which represents institutional investors with more than $2 trillion under management, said APRA's guidance was a first step toward stronger regulatory action to address the systemic financial risks created by climate change.

“Other markets are moving to mandatory climate risk disclosure regimes, including New Zealand, the United Kingdom, Hong Kong and potentially the United States,” said IGCC CEO Emma Herd.

“The draft APRA guidance serves as a good basis to begin moving towards a similar mandatory regime in Australia.”