Palestine Monetary Authority
PALESTINE MONETARY AUTHORITY

Instructions No. (9) of 2026

Regarding the Effective Principles for Managing Climate-related Financial Risks

Pursuant to the provisions of Decree-Law No. (9) of 2010 regarding Banks, particularly Articles (43, 72) thereof, and in accordance with the powers vested in us, and in pursuit of the public interest, we have issued the following instructions:

Article (1)

Definitions

The words and phrases contained in these instructions shall have the meanings assigned to them below, unless the context indicates otherwise:

Climate Change:	The natural variability of the climate and the change in the composition of the global atmosphere, over comparable periods of time, as a result of human activity, directly or indirectly.
Climate-related Financial Risk:	The losses that may arise from climate change or from efforts undertaken to mitigate climate change, and their economic and financial impacts.
Physical Risks:	The losses and costs that may result from the increased severity and frequency of the following risks: 1- Acute Physical Risks: These are severe events related to climate change such as heat waves, landslides, floods, wildfires, and storms. 2- Chronic Risks: These are gradual long-term shifts in the climate such as changes in precipitation, changes in weather, rising sea levels and average temperatures. 3- Indirect effects of climate change, such as the loss of ecosystem services including desertification, water scarcity, degradation of soil quality or the marine environment.

Climate Change:

The natural variability of the climate and the change in the composition of the global atmosphere, over comparable periods of time, as a result of human activity, directly or indirectly.

Climate-related Financial Risk:

The losses that may arise from climate change or from efforts undertaken to mitigate climate change, and their economic and financial impacts.

Physical Risks:

The losses and costs that may result from the increased severity and frequency of the following risks: 1- Acute Physical Risks: These are severe events related to climate change such as heat waves, landslides, floods, wildfires, and storms. 2- Chronic Risks: These are gradual long-term shifts in the climate such as changes in precipitation, changes in weather, rising sea levels and average temperatures. 3- Indirect effects of climate change, such as the loss of ecosystem services including desertification, water scarcity, degradation of soil quality or the marine environment.

Palestine Monetary Authority

Palestine Monetary Authority
PALESTINE MONETARY AUTHORITY

Transition Risks:	The losses that may arise during the transition to a low-carbon economy, which include changes in policies, legislative and regulatory frameworks, technology, the market and customers.
Climate Risk Drivers:	The factors or events that lead to the emergence or increase of climate-related risks, whether related to physical risks or transition risks.
Transmission Channels:	The mechanisms through which climate risk drivers transmit into financial risks that affect the financial sector directly or indirectly.
Environmental, Social and Governance (ESG) Standards:	A set of standards that influence investment, credit, or internal operations decision-making, and take into account how the decision contributes to environmental issues, such as climate change, sustainability and social impacts, disclosure and transparency, and compliance.
Materiality:	The extent of the importance or impact of climate-related information or risks on the bank's condition, performance, or financial position, such that omitting or inaccurately presenting them affects the decisions of the board of directors, executive management, or supervisory authorities.

Article (2)

Objective and Scope of Application

1. The provisions of these instructions aim to:

Establish a regulatory framework for managing climate-related financial risks, thereby enhancing banks' ability to identify, assess, measure, monitor and manage these risks, and integrate them within governance, risk management and internal control frameworks, based on international standards and related best practices.

Enhance banks' readiness to deal with the potential impacts of climate-related financial risks in a manner that supports business continuity and the soundness of their financial positions.

Enhance awareness and understanding among banks regarding climate-related financial risks and their potential impacts.

Support capacity building, training and gradual qualification of bank employees in this field.

Palestine Monetary Authority
PALESTINE MONETARY AUTHORITY

2. The provisions of these instructions shall be applied in accordance with the principle of Proportionality to all banks licensed by the Monetary Authority, taking into account the bank's size, the nature of its business and operations, and its level of exposure to climate-related financial risks.

Article (3)

Board of Directors and Executive Management

The bank must comply with the following:

1. Adopt policies and operating procedures that take into account climate-related financial risks, and review them periodically across various functions, in a manner that ensures the effectiveness of risk management frameworks, and in line with long-term strategies and objectives, and at the group level where applicable, ensuring consistency of policies and procedures for managing those risks.

2. Develop and apply an appropriate methodology to understand and assess the potential impacts of climate-related financial risks in the short, medium and long term, including physical and transition risks, taking into account Environmental, Social and Governance (ESG) standards, and integrate them into strategies, policies and risk management frameworks.

3. Assess the impact of climate-related risks on achieving strategic objectives, the bank's business model, and risk management objectives, and assess the need to take appropriate measures to address their potential impacts, while ensuring the participation of executive management and keeping the board of directors informed periodically of related developments.

4. Assign responsibilities and tasks related to climate-related financial risks to members and/or committees of the board of directors, clearly define related roles and responsibilities within the organizational structure, and their administrative staffing, and ensure the effective availability of adequate resources and expertise across various functions.

5. Board of directors and executive management members shall possess the appropriate understanding, knowledge and skills to enable them to integrate these risks into strategies and risk management frameworks, including across various related functions and work teams, particularly the bank's internal sustainable finance work team, through the implementation of appropriate awareness and capacity-building programs on a periodic basis for board of directors and executive management members and related functions in this field.

Palestine Monetary Authority
PALESTINE MONETARY AUTHORITY

Article (4)

Internal Control and Oversight Systems

The bank must integrate climate-related financial risks within internal control and oversight systems, in a manner that ensures clear distribution of roles and responsibilities among various functions, to ensure the effectiveness of identifying, measuring, monitoring and managing these risks, provided that it includes at a minimum the following:

1. A clear definition and identification of tasks and responsibilities related to these risks.

2. Taking into account risks with material impact when studying, reviewing and assessing credit applications and customer acceptance, as well as when designing services, products and new business models.

3. Assessing and continuously monitoring climate-related risks, with the compliance function ensuring adherence to related regulatory frameworks.

4. The internal audit scope shall be comprehensive of all aspects related to these risks, particularly assessing the quality and effectiveness of internal control and oversight systems and the risk governance framework, in light of the required changes in work methodologies, the risk profile and the data quality required for that.

Article (5)

Managing Climate-related Risks

The bank must comply with the following:

1. Adopt a comprehensive approach to managing climate-related financial risks, including identifying, measuring, monitoring and managing these risks, while taking the necessary arrangements to mitigate their impacts.

2. Conduct a periodic assessment of the materiality of climate-related financial risks, in accordance with standards and methodologies determined in proportion to the size of its business, the nature of its activities, and the level of its exposure to these risks, and in a manner that reflects changes in its business environment.

3. Identify climate-related risk drivers and their transmission channels and assess their potential impact on its various activities, operations, and exposures, in proportion to the size of its business, the nature of its activities, and the level of its exposure to these risks.

4. Integrate climate-related financial risks into the risk appetite framework and the risk management processes for all types of risks (credit, market, operational, liquidity, strategic, and others), taking into account environmental, social, and governance (ESG) standards.

Palestine Monetary Authority
PALESTINE MONETARY AUTHORITY

5. Obtain sufficient and reliable data from clients, verify their understanding of the impact of climate-related risks on their activities and projects, and ensure that this information is included in risk assessments.

6. Develop databases, indicators, and appropriate tools to monitor and measure climate-related financial risks and their impact on the bank's business, in proportion to the size and nature of its business, and in a manner that supports the gradual development of practices for managing these risks.

7. Develop key risk indicators (KRIs) to monitor exposure to them and measure their impact on various aspects, such as credit and market, with periodic updating in accordance with relevant developments.

8. Assess the impact of climate-related risk drivers on various operations and services, by understanding their transmission channels and their implications for financial risks, including:

(a) Credit risk: Analyze the impact on exposures, sectoral and geographical concentrations, collateral, and credit granting operations, and monitor these exposures continuously.

(b) Market risk: Assess the impact of risks on asset values, price volatility, and investments that may be affected by economic, regulatory, or technological changes related to climate, whenever appropriate to the nature of the bank's business.

(c) Operational risk: Including the ability to continue providing critical operations and compliance with laws and instructions, and the impact of climate-related risks on external parties and essential service providers must be taken into consideration.

(d) Liquidity risk: Assess the potential impact of risks on cash flows, funding sources, and available liquidity.

(e) Capital adequacy: Gradually and in proportion to the bank's level of readiness and data availability, include climate-related financial risks with material impact in the internal capital adequacy assessment process (ICAAP) and stress tests, taking into account severe but reasonable scenarios, and in a manner that prepares the bank to deal with any related requirements or guidelines that the Monetary Authority may issue in the future in this regard.

9. Build capacity in the field of analyzing climate-related financial risks, including developing the data and methodologies necessary to understand the relationship between these risks and other financial risks, and enhancing readiness to adopt more advanced practices and tools in the future in accordance with what the Monetary Authority determines.

Palestine Monetary Authority
PALESTINE MONETARY AUTHORITY

Article (6)

Monitoring and Reporting

The bank must comply with the following:

1. Take the necessary measures to provide comprehensive and reliable data that enables the preparation of various reports related to climate-related financial risks in a timely manner, and ensure the ability of systems to monitor these risks in a manner that supports effective decision-making by the Board of Directors and executive management.

2. Develop the bank's ability to collect climate-related financial risk data, including identifying and reporting related exposures and concentrations.

3. The process of collecting climate-related financial risk data shall be part of the comprehensive data governance framework and information technology infrastructure, to ensure the accuracy and reliability of the collected data.

4. In the event that sufficient data is not available, the bank may use documented and justified assumptions and estimation methodologies.

5. Engage clients and relevant parties effectively, with the aim of improving the quality of data related to climate-related financial risks and increasing its availability.

6. Develop appropriate qualitative and/or quantitative measures and indicators to assess, monitor, and report climate-related risks, and prepare periodic reports thereon in a timely manner, taking into account the size of the bank, the nature of its business, and data availability, and as determined by the Monetary Authority or any guidelines it issues in this regard.

7. Submit periodic reports on climate-related risks to the executive management and the Board of Directors, in proportion to the nature and size of exposures, and at least once annually.

Article (7)

Scenario Analysis

The bank must work gradually to build capacity and develop the data, methodologies, and systems necessary to understand and assess the potential impacts of climate-related financial risks on the business model, strategy, capital, and liquidity in the short and long term.

Palestine Monetary Authority
PALESTINE MONETARY AUTHORITY

Article (8)

Disclosure and Transparency

The bank must disclose information with material impact related to climate-related risks, based on recognized international guidelines and standards, such as the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), and the standards issued by the International Sustainability Standards Board (ISSB).

Article (9)

Implementation and Enforcement

All competent authorities, each within its scope, must implement the provisions of these instructions in accordance with the following timeline, in a phased and cumulative manner, ensuring the completion of the requirements of each phase before moving to the next phase:

Article Number	Article Title	Application Date
3	Board of Directors and Executive Management	2028/01/01
4	Internal Control and Compliance Systems	2028/01/01
5	Climate-Related Risk Management	2028/07/01
6	Monitoring and Reporting	2028/07/01
7	Scenario Analysis	2029/01/01
8	Disclosure and Transparency	2029/01/01