HKMA published the finalized common assessment framework on green and sustainable banking in Hong Kong. The framework assesses the readiness and preparedness of an institution in addressing climate (both physical and transition) and environmental risks. HKMA intends to implement the assessment on about 50 authorized institutions based predominantly on their asset sizes and business activities. Selected authorized institutions will have 12 weeks to complete this initial round of assessment, taking into account the current COVID-19 situation.
The framework was developed with the support of a working group consisting of 22 authorized institutions. It will collect information about the stage of development with respect to climate risks and environmental risks under six key elements and 20 sub-elements:
- Governance, including board and senior management oversight and roles and responsibilities
- Corporate planning and tools, including strategic plan, business plan, financial plan, scenario analysis, and stress testing
- Risk management process, including identification, measurement, monitoring, reporting, and control and mitigation
- Business policies, products, and services, including lending and investment
- Performance and resources, including indicators, targets, staff capacity, and data collection and processing
- Disclosure and communication
These elements and sub-elements represent the major areas on which an institution would focus in addressing climate and environment-related risks and are usually found in the standards, initiatives, or recommendations of international bodies and regulators of other jurisdictions. The framework is intended to help authorized institutions formulate strategies and approaches and to inform the design of supervisory expectations and requirements under Phase II of the three-phased approach of HKMA to promote green and sustainable banking in Hong Kong.
Keywords: Asia Pacific, Hong Kong, Banking, Sustainable Finance, Climate Change Risk, ESG, Stress Testing, Disclosures, Governance, Reporting, Common Assessment Framework, HKMA
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