HKMA urges higher climate risk awareness for banking resilience

It is necessary to raise climate risk awareness and strengthen banks’ readiness to enhance the resilience of the banking system , according to the Hong Kong Monetary Authority (HKMA).

Recent natural disasters, including mudslides in Tibet and Nepal as well as several typhoons and torrential rainstorms hitting Hong Kong, underscore the impacts of climate change.

Arthur Yuen Kwok-hang, Acting Chief Executive of the HKMA, said on Tuesday that given climate risk unfolds with long-term uncertainty, banks need to understand the impact for their clients and how that exposure will evolve. Therefore, guidelines centered on customer engagement are being formulated to convey the risk awareness to the real economy.

But awareness alone is not enough. Both banks and the market need to manage risks well. The government has set out a roadmap on sustainability disclosure which will set a well-defined pathway for the market. A landscape study has been completed, with a policy consultation following later this year, he added.

HKMA unveiled the Phase 2B prototype of the Hong Kong Taxonomy for Sustainable Finance yesterday for public consultation, broadening green and transition activities coverage and refining the assessment framework so that financial institutions can identify climate risks and opportunities and direct capital out of high-emission sectors.

The taxonomy will continue to expand, and the government has offered incentives with subsidies that have been granted to over 700 green and sustainable debt instruments issued in Hong Kong, with a total underlying issuance volume of over US$200 billion (HK$1.57 trillion).  

Frank Feng

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