HONG KONG: Hong Kong’s financial regulator will explore requiring banks to provide more disclosure on climate finance, as it rolls out the latest version of its guidelines for funding projects that cut carbon dioxide emissions or shield against weather risk.
The Hong Kong Monetary Authority (HKMA) is planning to conduct a survey next year into how banks use their sustainable finance taxonomy, said executive director for Banking Policy, Donald Chen.
The responses will determine “how to incorporate the taxonomy into our supervisory practice”, he said.
“We have not come down to the specifics yet,” he said in an interview. “But usually that will also mean, for example, certain disclosures to us about the extent of investment or finance that has been benchmarked against the taxonomy.”
The regulator released a new version of its two-year-old taxonomy for public consultation earlier this month, to help banks classify project financing for shoreline protection and flood management – two key risks facing the city.
It also added more activities and technical criteria for what’s considered a green or a transition deal.
According to the draft, the adaptation projects whitelisted under the taxonomy span six sectors: energy, transportation, buildings, telecommunications, risk management and response, and water.
They include areas such as installation of automated grid controls, vegetation management around power lines and use of off-grid renewables and batteries.
Some jurisdictions ask banks to disclose whether certain products are in line with the taxonomy.
That “is one possible way. We will think about it later, after we have done the systematic collection of information,” Chen said.
The aim of the taxonomy is to attract more private capital into such projects across Hong Kong, and potentially in mainland China and South-East Asia, Chen said.
For instance, taxonomy-aligned mitigation instruments such as syndicated loans, notes and bonds have ranged from US$10mil to US$800mil in size, he added.
Entities domiciled in Hong Kong have issued about US$150bil of labelled debt based on environmental, social or governance metrics since 2020, according to data compiled by Bloomberg Intelligence.
For now, Hong Kong requires listed and unlisted financial firms to assess and manage their exposure to climate risks, and asks some to disclose issues that can have a material financial impact on cash flows and financial performance.
It has rolled out a physical risk assessment tool to help companies.
Standard Chartered Plc said that 16.6% of its wealth and retail banking portfolios backed by property collateral in Hong Kong were exposed to flood risk as of September 2025, according to its annual report.
Meanwhile, HSBC Holdings Plc started implementing physical-risk assessments at mortgage origination for retail clients last year.
Hang Seng Bank Ltd, now owned by HSBC, said the group’s largest commercial real estate portfolio is located in Hong Kong and is primarily exposed to flooding risks, including coastal inundation and tropical cyclones.
Last week, the city released its first five-year economic plan, stating it aims to stop using coal for electricity generation by 2035 and increase the share of zero-carbon energy to about 60% to 70%.
“The taxonomy is a living document. The list of activities that you see there will keep expanding,” said Chen. — Bloomberg
