The Hong Kong Securities and Futures Commission (SFC) is moving towards implementing mandatory climate risk regulations for asset managers as part of the bigger process of integrating environmental, social, and governance (ESG) standards into the industry.
The Bank of England and the Banque de France are spearheading the first comprehensive climate-change stress tests of banks and insurers. Tests for the UK’s largest institutions will be mandatory while participation by France’s largest banks, a number of which already consider climate risk in their risk-management framework, is voluntary. Both the UK and French stress tests will run 30-year climate-change scenarios based on data provided by the banks. Results from the French tests are expected next April while the Bank of England has postponed its tests until mid-2021 due to the pandemic.
There are prudential and financial stability risks associated with climate change and the transition to a sustainable economy which must be prioritized – something at the fore of the Central Bank’s approach to implementing the Environmental, Social and Governance (ESG) regulatory framework.