HKMA Bank Climate Rules: GS-1 to GS-2

Climate risk management for Hong Kong banks is not a "do as much as you feel like" optional exercise — it's written into the HKMA's Supervisory Policy Manual. GS-1 "Climate Risk Management" (30 Dec 2021) sets expectations across four pillars; GS-2 "Transition Planning" (V.1, effective 22 Sep 2026) goes a level deeper, requiring banks to build a "sound and proportionate" net-zero transition-planning process. Together they turn climate from a PR topic into a supervisory accountability item.

GS-1's core expectations

GS-1 is a "non-prescriptive" guide — it doesn't tell you how; it tells you how the supervisor will judge whether you've done it. Of the four pillars, risk management is the hardest requirement: banks must embed climate risk into their existing frameworks across identification, measurement, monitoring, reporting, control and mitigation — and hold documented policies and procedures proving it. Both physical risk (floods, typhoons) and transition risk (policy, technology, market shifts) must be covered.

GS-2 makes "transition planning" three-dimensional

Five years after GS-1, supervision moves from "are you managing climate risk" to "do you have a plan for the net-zero transition." GS-2 (effective Sep 2026) defines transition planning = the internal planning and risk-management processes a bank undertakes for net-zero-transition-related risks and business-model change. It requires banks to address:

• Governance — clear accountability for the transition plan
• Strategy — considering jurisdictional climate targets and multiple plausible futures
• Risk management — covering physical + transition risk (even orderly transitions involve climate change)
• Scenario analysis — as the tool for transition planning
• Communication — explaining the plan to stakeholders

What the second green assessment found

In Q4 2023 the HKMA ran its second green assessment, surveying 38 banks on transition-planning practices (40% Mainland, 8% local, 18% Asia-Pacific, 29% European, 5% Americas). Findings: most banks had set net-zero targets (own operations + financed emissions); financed emissions were mostly tracked by sector (power, oil & gas, coal, steel, autos most common); nearly half had committed to no new coal-power financing. Good practices included: indicators across short/medium/long horizons, sector-specific transition targets, and scenario analysis tied to business decisions.

How it connects to other requirements

• Disclosure — banks are PAEs, required to report under the HK Standards by 2028 (see the ISSB roadmap)
• Taxonomy — use the Hong Kong Taxonomy to classify green/transition assets (see green taxonomy)
• Funding — GSF grant scheme subsidises green-bond issuance costs (see green bonds & grants)

Official sources