Good practices on climate risk management

HONG KONG MONETARY AUTHORITY 香港金融管理局 Banking Supervision Department Our Ref: B1/15C B9/81C 27 0ctober 2025 The Chief Executive All Authorized Institutions Dear Sir / Madam, Good practices on climate risk management I am writing to share good practices and key observations regarding Authorized Institutions' (AIs') climate risk management frameworks and processes'. The good practices and key observations are derived from the HKMA 's latest supervisory exercises including a fresh round of thematic examinations and the second series of consultative sessions, which focused on the robustness and adequacy of participating AIs' climate risk management frameworks and practices2 All participating AIs embedded climate risk considerations into their risk management frameworks, tailored to their individual circumstances. The HKMA engaged in discussions with these AIs to gain a deeper understanding of their efforts and initiatives to address the challenges they face in measuring and managing climate risks. Key themes of the good practices in managing climate risks identified among the participating AIs are summarised as 餉llows:

1. Advancing toward a more quantitative-oriented climate risk management framework - Most participating AIs have established quantitative metrics and limits in their climate risk appetite statement to effectively govern the bank-wide climate risk limit structure. Participating AIs utilised a range of tools, including climate risk materiality assessments, portfolio concentration analysis, and stress testing, to evaluate the potential impact of climate risks on their business and operations. Many AIs are also actively exploring the use of Fintech solutions to facilitate climate risk management in a more systematic and efficient manner. IFurther to the HKMA 's earlier circulars sharing good practices and tools on:

• due diligence processes for green and sustainable products (ht館s:/庀rdr.hkma.gov.hkleng/doc￾ldg/doc1可2022 1209-3-EN);
• climate-related risk governance (https:/庀rdr.hkma.gov.hkleng/doc-ldg/docldl2o24 1024-2-EN); and
• supporting green transformation of corporate customers (https://brdr.hkma.gov.hkfcng/doc￾ldg/current/20250930-4-EN). 2 A total of21 AIs participated in these supervisory exercises, including 11 locally incorporated Ms and 10 overseas-incorporated Ms with head offices across the Asia-Pacific, Europe and North America. 55th Floor, Two International Finance Centre 8 Finance Street, Central, Hong Kong Tel: (852) 2878 1946 Fax: (852) 2878 1670 E-mail: clkchu@hkma.gov.hk Website: www.hkma一gov.hk 香港中環金融街8 虢國際金融中心2 期55 樓 電話: (852) 2878 1946 傳真: (852) 2878 1670 電郵: clkchu@hkma.gov.hk 網址：ww凡v.hkma.gov.hk

2 2. Bridging data gaps to further incorporate climate risks into credit decisions - Some participating AIs have established frameworks to guide the selection of suitable methodologies and tools for assessing climate risk across diverse counte印arties. Many participating AIs have developed climate/ESG questionnaires to facilitate the collection and assessment of climate-related data. They also employ various methods to address the remaining data gaps. Many participating AIs adopt a systematic approach to inte亭ating climate risk assessments into credit risk management processes 3. Deepening and broadening the embedment of climate considerations in the management of other traditional risk 鑼pes - Some AIs have established metrics and limits to monitor and report the climate risk impacts on other traditional risk types, including operational risk, liquidity risk, and market risk. Some AIs have also developed a holistic framework and dedicated policies and control measures to manage reputational risks arising from climate-related risk drivers. Details of good practices and key observations can be found in the Annex. The HKMA encourages institutions to refer to these good practices when considering 魚灶her enhancements to their climate risk management practices. Questions regarding this circular may be directed to climaterisk@hkma.gov.hk. Yours 魚ith魚lly, Carmen Chu Executive Director (Banking Supervision) Endl