Hong Kong Banks to report on Climate Risk
Joining regulators around the world who are increasingly concerned about the impact of climate change on financial institutions, the Hong Kong Money Authority (HKMA) recently set out a supervisory approach designed to ensure banks build resilience to climate-related risk.
The HKMA’s white paper on green and sustainable banking acts as a precursor to a consultation, expected next year. It explains the rationale for introducing measures in this area and includes guiding principles for upcoming supervisory expectations.
In terms of disclosures and data, HKMA notes that supervised financial institutions should take the Task Force on Climate-Related Financial Disclosures (TCFD) recommendations into account while developing an ‘appropriate’ approach to disclosing climate-related risk that enhances transparency. Further, processes to monitor and report risk exposure, and timely, regular updates on exposure, should be put in place.
While these guidelines are subject to change following next year’s consultation, it’s positive to see Hong Kong looking to the TCFD recommendations while developing climate-change risk disclosures. The next step would be to incorporate structured, XBRL data into mandatory non-financial disclosures, ensuring the climate-risk exposures of Hong Kong’s financial institutions can be easily analysed and compared world-wide.
Read the white paper here.