How the banking and financial system operates will clearly have an impact on the way in which climate risk is managed or reduced. The HKMA, in support of the mission to reduce climate risk and to achieve sustainable finance, would like to launch three sets of measures. Green and Sustainable Banking 3. In September 2017, I announced seven measures that the HKMA would undertake to bring Hong Kong into the new era of Smart Banking. The main objective of the Smart Banking Initiatives is to promote financial innovation, better customer experience and financial inclusion. What I am going to propose today is to enlarge the ambit of this exercise to “Smart and Sustainable Banking”. We all appreciate the damages and economic losses caused by increased frequency and ferocity of natural disasters arising from global warming and climate change. The increased risk of business disruption and adverse impact on collateral value of properties also pose real threat to the banking system. So it is now time for the HKMA and the banking industry to take a more proactive approach to manage climate risk by pursuing “Green and Sustainable Banking”. The HKMA will soon issue guidance to the banks in Hong Kong that a three-phased approach will be taken to promote Green and Sustainable Banking: Phase I – this will entail the development of a common framework to assess the existing baseline of individual banks in order to establish how “green” they are currently.
The baseline assessment would include the environmental risk of a bank’s lending and other businesses. In this Phase, the HKMA will need to work with the industry to develop a ___ (a) common framework, drawing on the latest international standards and best practices. The HKMA will also, in collaboration with the relevant international bodies, such as the International Finance Corporation (IFC), provide capacity building and training programmes to banks in Hong Kong for better understanding of the green principles and methodology in undertaking the baseline assessment. Phase II – once we have completed the baseline assessment of banks in Hong Kong in Phase I, the HKMA will engage the industry and other relevant stakeholders in a 1/3  BIS central bankers' speeches  (b) consultation on the supervisory expectation or requirement on Green and Sustainable Banking going forward. The key objective of this Phase is to set tangible deliverables for Hong Kong’s banking industry to become “greener” and “more sustainable”. Phase III – once the deliverables have been set, the next Phase is Implementation, (c) Monitoring and Evaluation. The success of this Phase depends crucially on appropriate measurement of the “greenness” of the banks and the timely disclosure of progress or the lack of it. 4. With the support of the banking industry, I expect Phase I could be completed within around 12 months’ time from now. Responsible Investment 5. In the past few years, there has been a significant shift in mind-set amongst asset owners on Green and ESG investments.