In May 2019, the Hong Kong Monetary Authority (HKMA) introduced a three-phased approach to support the development of green and sustainable banking in Hong Kong. The HKMA has now released the common assessment framework under Phase 1, following feedback received from the banking industry. The common assessment framework will be used to assess the “greenness” of individual authorized institutions (AIs).
By way of recap, the HKMA announced during the Green Finance Forum held on 7 May 2019 that it will adopt a number of measures to support green and sustainable banking in Hong Kong and will roll out these measures in three phases:
Phase I – developing of a common framework to assess the “greenness baseline” of individual AIs.
Phase II – launching a consultation with the banking industry and other relevant stakeholders on the appropriate supervisory expectation to be set on green and sustainable banking. The aim is to define tangible deliverables to promote green and sustainable finance.
Phase III – following implementation of deliverables set under Phase II, the HKMA is expected to closely monitor and evaluate the progress of each AI under this phase.
The Common Assessment Framework
On 13 May 2020, the HKMA published the finalised self-assessment framework in its circular (see the Annex to the circular). The HKMA has indicated that the overall objective of the framework is to enable AIs to assess their readiness and preparedness in managing climate change and environmental-related risks. The framework is not intended to be a pass or fail test.
Through the common assessment framework, the HKMA will obtain relevant information under six key elements which will be used to assist the HKMA in the design of the supervisory expectations under Phase II. These cover: (i) governance, (ii) corporate planning and tools, (iii) risk management process, (iv) business policies, products and services, (v) performance and resources, and (vi) disclosure and communication.
The current intention is to conduct the assessment on approximately 50 AIs (selected based on their size and business activities). Chosen AIs will be contacted by the HKMA separately and will have 12 weeks to complete the initial round of assessment.
A copy of the circular can be found here.