SYDNEY (Reuters) - Australian regulators plan to introduce mandatory stress tests soon that will look at the impact of climate change on banks, insurers and the A$3 trillion ($2 trillion) pension fund industry, sources with direct knowledge of the matter said.

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The tests, to be based on measures being developed in England, have been in the works for some time but their introduction has been hastened after a devastating bushfire season, one of the sources said.

Economists expect recent bushfires to drag on gross domestic product growth by 0.1-0.4 percentage points through March 2020, with agriculture, retail, tourism and construction the hardest hit.

As part of the stress test, banks will be required to run risk assessments for their loan books and business models under various climate scenarios, the people said, declining to be identified as they were not authorised to speak to media.

The Australian Prudential Regulatory Authority (APRA) said that the development of a climate-change stress test was a key measure as it boosts scrutiny of how financial institutions manage their climate risks.

“We intend to release a letter to the industry outlining the next phase of our regulatory response to climate risk in a few weeks,” an APRA spokesman told Reuters on Monday.

Australian banks have already started taking steps to combat the effects of climate change on their business models.

Commonwealth Bank of Australia CBA.AX, the nation's No.1 lender, and Westpac WBC.AX are performing climate change scenario analyses on their portfolios.

ANZ has said its focus area for the coming financial year would include climate-related risk governance and stress testing of selected portfolios. The banks have also pledged to reduce exposure to high carbon sectors such as coal.

It is not clear if banks will be required to publicly disclose results of the stress tests mandated by APRA.

In December, the Bank of England (BoE) said Britain’s top banks and insurers should be tested together for the first time in 2021 to quantify the potential financial damage from climate change.

The BoE chairs an international group of regulators that is developing a global climate stress test. It is expected Australia’s test will be based on this.