Hong Kong weighs tougher climate finance disclosures for banks

Hong Kong's financial regulator, the Hong Kong Monetary Authority, is considering mandating banks to disclose more information regarding climate-related financing. The authority is set to launch a 2027 survey to evaluate how banks employ its sustainable finance taxonomy in funding initiatives that reduce carbon emissions or mitigate weather-related risks.

The regulator recently updated its taxonomy, which assists banks in categorizing project financing for shoreline protection and flood management – both significant threats to Hong Kong. The updated taxonomy encompasses six sectors, including energy, transportation, buildings, telecommunications, risk management and response, and water.

Certain projects, such as automated grid controls, vegetation management around power lines, and off-grid renewable energy and batteries, are considered green or transition deals under the taxonomy.

Chen, the executive director for banking policy, suggested that the regulator might require banks to disclose details about the proportion of investments or financing aligned with the taxonomy. The taxonomy's main objective is to stimulate increased private capital investment in such projects within Hong Kong, mainland China, and Southeast Asia.

As of 2020, entities based in Hong Kong had issued approximately US$150 billion in labeled debt tied to environmental, social, or governance metrics, according to Bloomberg Intelligence data. Currently, financial institutions in Hong Kong are mandated to evaluate and manage their exposure to climate risks, with some being required to disclose issues that could materially impact cash flows and financial performance.

The authority has also introduced a physical risk assessment tool to aid companies in identifying and managing these risks.

Standard Chartered reported that 16.6% of its wealth and retail banking portfolios, secured by property collateral in Hong Kong, are exposed to flood risk as of September 2025. HSBC Holdings implemented physical-risk assessments for retail clients' mortgages in 2025. Hang Seng Bank, now owned by HSBC, noted that its largest commercial real estate portfolio in Hong Kong is primarily vulnerable to flooding risks, including coastal inundation and tropical cyclones.

The city released its first five-year economic plan in September, which aims to phase out coal-fired electricity generation by 2035 and boost zero-carbon energy to around 60-70%. The taxonomy is viewed as a dynamic document, with Chen emphasizing that the list of activities included will continue to expand.