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Two major Canadian banks are part of a new consortium of large financial institutions aiming to create common standards for managing risks from climate change, in tandem with the U.S.-based Risk Management Association.

Royal Bank of Canada and National Bank of Canada are among 19 large banks, including Bank of America Corp. and Wells Fargo & Co., that are forming the RMA Climate Risk Consortium. The group will serve as an industry roundtable to share best practices and craft consistent frameworks for measuring and defining climate risk.

Canada’s six largest banks have committed to targets to reach net-zero emissions in their lending and investment portfolios by 2050, and to set interim targets for 2030, joining a global trend toward net-zero pledges. Last fall, the Big Six banks signed on to the Net-Zero Banking Alliance (NZBA), an international industry group convened by the United Nations and spearheaded by Mark Carney, former governor of the Bank of Canada and the Bank of England.

In order to meet those targets, banks must first agree on a common taxonomy and set of rules to measure the risks that financial institutions and their clients face from a changing climate. That could mean anything from assessing the physical risks to companies’ real estate and assets from extreme weather to gathering data on the emissions created by those clients.

Many banks have already embraced methods developed by an international body, the Partnership for Carbon Accounting Financials (PCAF), as they grapple with the challenge of measuring greenhouse gases that emanate from projects and companies financed by their banks.

“This announcement builds on initiatives already under way to support the transition to net-zero with our clients and industry peers,” said RBC spokesperson Rafael Ruffolo, in an e-mail.

The Philadelphia-based Risk Management Association is a non-profit that helps its members at financial institutions improve their risk-management practices. Graeme Hepworth, RBC’s chief risk officer, serves on the RMA’s board of directors, and National Bank chief risk officer William Bonnell is the board’s immediate past chair.

“With the world facing the existential challenge of climate change, it’s more important than ever that banks work together on this issue,” RMA chief executive officer Nancy Foster said in a statement.

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