Transformation Towards Sustainable Financial Services

Integrating environmental, social and governance (ESG) activities into your day-to-day operations is not just "the right thing to do", it is also a key factor in your organization's sustainability, and ultimately, its success. As financial regulators in Asia Pacific begin to demand more progress, financial firms must prepare for increasingly stringent requirements by fully integrating ESG into their core business models, offerings, and risk management processes.

Zooming in on ESG risks, environmental risks (specifically climate change) now top the global risk agenda according to the World Economic Forum Global Risk Report 2020. In response to this trend, various international initiatives have sprung up, such as the Taskforce for Climate-related Financial Disclosures (TCFD). Europe continues to lead in implementing TCFD recommendations and Asia Pacific regulators are accelerating the development of climate strategies. In May 2020, the Hong Kong Monetary Authority (HKMA) started assessing the "greenness baseline" of 50 authorized institutions using the common assessment framework for green and sustainable banking. A month later, it issued the White Paper on Green and Sustainable Banking, followed by a circular on climate risk management practices in July 2020, which said the regulator will stress test the banking sector's "climate resilience".

Deloitte provides end-to-end solutions that assist clients to integrate ESG into their day-to-day operations, especially in areas which will attract increasing attention from governments, regulators, investors, and society:

Regulatory Compliance

• Interpret new regulations, identify and rectify any gaps in your existing practices to avoid potential non-compliance

Scenario Analysis & Stress Testing

• Identify, develop and embed climate scenarios in your existing risk management framework and ascertain institutional robustness and resilience

Risk Appetite, Governance & Risk Reporting

• Incorporate and integrate ESG risks (especially climate risk) and sustainability considerations into your risk management framework

Risk Modelling & Asset-Liability Valuation including Stranded Assets

• Benchmarking against the Pillar 1 and Pillar 2A methodology of existing ESG models

Sustainability Strategy

• Analyse your existing ESG capability maturity, and partner with you to develop and execute a sustainable finance framework
• Support your organization in improving its score under the HKMA framework assessment from a 0 to a 1 or 2 through support for each of the questionnaire's six key elements