Building a Sustainable Banking System

ESG adoption has accelerated across sectors and geographies, bringing the social element to the forefront. With financial regulators increasing the requirements for banks to embed climate change risk into the banking system, financial institutions are actively assessing exposure to climate change risks and implementing strategies to address the need to support a zero-carbon economy. HSBC recently hosted a webinar to discuss the ESG outlook for 2021 and an overview of the regulatory developments in Asia-Pacific.

ESG is becoming mainstream

Over the past two years, the number of companies committed to net zero targets have grown to over 1,500, representing over USD11.4 trillion in revenue¹. In fact, 85 per cent of hedge funds see institutional investors as the biggest drivers of interest in ESG investing².

Regulators are responding to this growth

Support among corporates and regulators globally for the Task Force on Climate-related Financial Disclosures (TCFD) has grown rapidly³. From Banque De France to Monetary Authority of Singapore, regulatory bodies around the world are building frameworks for ESG risk management and inviting banks to participate in pilots for climate stress tests.

Priorities for building a sustainable banking system

Banks are ranked 2^nd of all sectors covered in the Moody’s ESG ratings with a high disclosure rate of 85 per cent⁴. To build a sustainable banking system, reporting with a double materiality concept can help financial institutions manage risks that are related to ESG.