Australia’s premier financial regulatory body has delivered a stark warning to the country’s politicians, saying that climate change already poses “system-side” financial risk, and not enough is being done about it.

The warning was given by the Geoff Summerhayes, a former head of Suncorp and now a board member of the Australian Prudential Regulation Authority. It echoed similar warnings delivered by Bank of England governor Mark Carney in recent years and work by the Financial Stability Board.

“While climate risks have been broadly recognised, they have often been seen as a future problem or a non-financial problem,” Summerhayes said in a speech to the Insurance Council of Australia Annual Forum.

“The key point I want to make today, and that APRA wants to be explicit about, is that this is no longer the case.

“Some climate risks are distinctly ‘financial’ in nature. Many of these risks are foreseeable, material and actionable now. Climate risks also have potential system-wide implications that APRA and other regulators here and abroad are paying much closer attention to.”

Summerhayes said that APRA wanted more work on understanding the risks involved in not taking any action.

“We are keenly aware of potential systemic implications. But in simple terms, a comprehensive understanding that will help to identify and avert potential vulnerabilities is not possible unless entities and regulators are systematically monitoring, disclosing and talking about these risks,” he said.

“It’s unsafe for entities or regulators to ignore risks just because there is uncertainty, or even controversy, about the policy outlook. Like all risks, it is better they are explicitly considered and managed as appropriate, rather than simply ignored or neglected.”

The speech was described as significant by key players in the industry.

“This is the first time an Australian financial authority has clearly indicated climate risk is a concern for financial Institutions – although many of their overseas peers have already gone further,” said Kate Mackenzie, the head of finance and investment at The Climate Institute.

“It underlines that climate change is too important as a financial risk to allow ourselves to be distracted by politics.”

Emma Herd, from the Investor Group on Climate Change, said: “APRA’s comments today bring home the reality that climate change is a major economic force impacting the way we think about risk and opportunity”.

“APRA has …. set out clearly their view that Australian companies should be managing climate change and that there are system-wide implications for the Australian economy in how we manage this transition”.

Summerhayes flagged that APRA would see to “stress test” listed companies that could be affected by “adverse shoes” – presumably those with high exposure to the fossil fuel sector. And would then look at the system-wide implications.

He made it clear that the risks extended far beyond insurance firms and their exposure to losses from increasingly frequent and severe natural disasters.

These risks include the potential exposure of bank’s and insurers’ balance sheets to real estate impacted by climate change and to re-pricing (or even ‘stranding’) of carbon-intensive assets in other parts of their loan books.

“They also include exposure of asset owners and managers – an important consideration given the size of Australia’s superannuation sector and its heavy weighting towards carbon-intensive equities and a relatively resource-intensive domestic economy,” he said.

“The general point is that the transition now in train could potentially lead to significant repricing of carbon-intensive resources and activities and reallocation of capital.”