On 27 Oct 2025, the HKMA shared good practices on climate risk management based on supervisory exercises involving 21 AIs, highlighting advances in quantitative frameworks, data gap solutions, and embedding climate considerations into traditional risk management. The HKMA encourages institutions to reference these practices for enhancing their climate risk management frameworks, building on prior circulars on climate-related risk governance and green product due diligence.
This article was generated using SAMS, an AI technology by Timothy Loh LLP.
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Introduction
On 27 Oct 2025, the Hong Kong Monetary Authority (HKMA) issued a circular sharing good practices and key observations on climate risk management derived from its supervisory exercises, including thematic examinations and consultative sessions with 21 participating Authorized Institutions (AIs).
Key Good Practices Observed
The HKMA observed that participating AIs have advanced toward quantitative-oriented climate risk management frameworks, establishing metrics and limits in climate risk appetite statements and utilising tools such as climate risk materiality assessments, portfolio concentration analysis, and stress testing. Many AIs are also exploring Fintech solutions to enhance systematic climate risk management.
Data Integration and Risk Embedment
Participating AIs have developed frameworks to guide climate risk assessment methodologies and tools, including climate/ESG questionnaires to address data gaps. They employ systematic approaches to integrate climate risk assessments into credit risk management processes. Additionally, some AIs have established metrics and limits to monitor climate risk impacts on traditional risk types (e.g., operational, liquidity, market risk) and developed dedicated policies to manage reputational risks linked to climate drivers.
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