The Hong Kong Monetary Authority is to consult with banks on plans to introduce future supervisory measures relating to green and sustainable banking.

In an announcement on Tuesday (7 May), the HKMA said it plans to establish a set of ESG targets that it will expect regulated banks to work towards and will be consulting the industry on how best to monitor and evaluate organisations’ progress on key sustainability measures.

“Climate change is one of the major risks threatening the well-being of mankind,” said Norman Chan, chief executive of the HKMA.

“It must be tackled on a global basis and across different sectors of the economy. How the banking and financial system operates will clearly have an impact on the way in which climate risk is managed or reduced.”

The proposed measures on green and sustainable banking will be implemented in three phases, beginning with developing a “common framework” which the authority will be able to use to assess the current starting point on banks’ sustainability progress.

The second phase will involve engaging with the industry in a consultation on the future supervisory expectations on green and sustainable banking. Finally, the third phase will be to establish a monitoring framework to evaluate industry progress.

“The HKMA, in support of the mission to reduce climate change risks and to achieve sustainable finance, will launch three sets of measures,” Chan said.

The announcement as accompanied by a separate statement which outlined plans for the HKMA to prioritise green and ESG investments in its role as manager of the Exchange Fund.

It said that in instances where the long-term return is comparable to other investments on a “risk-adjusted basis” it would seek to choose the sustainable option.