Transformation towards sustainable financial services

Integrating environmental, social and governance (ESG) activities into business-as-usual operations is not simply seen as
the 'right thing to do', but also as a key factor in an organisation's sustainability, and ultimately, its success. For the
financial services sector, the sustainable finance agenda is evolving at a rapid pace. Several key drivers for change
have emerged:

Regulator interest Market opportunities

Regulators are shifting The green agenda opens
from light-touch Zooming in on ESG risks, up numerous lending and
expectations on environmental risks (e.g. climate investment opportunities;
disclosures to expecting financial services firms will
change) now top the global risk
comprehensive climate be actively looking to
risk stress testing and fully
agenda according to the World combine profits with
embedding ESG risks into Economic Forum Global Risk Report environmental and social
prudential supervision 2020. In response to this global purposes
trend, the Hong Kong Monetary
Authority initiated the common
assessment framework for green
and sustainable banking in May
Investor pressure Public and societal
2020 and will be conducting a pilot
Investors are increasingly opinion
concerned about the climate risk stress Public interest in
valuation of ‘stranded assets’ testing exercise. sustainability agenda has
and reputational risk. Fossil grown at all levels in
fuel divestment campaigns financial transactions and
continue to gather pace operational activities

Deloitte believes preparation in addressing climate and environmental risks will strengthen your broader
business proposition in addition to ESG-specific issues. Integrating ESG into your business-as-usual and risk
management activities are likely to enable you to capitalise on fresh opportunities for growth.

Integrating ESG into day-to-day operations

ESG issues may reflect in the Bank’s existing risk categories and/or may be reflected in a new ESG and climate risk category

Material ESG issues to consider Bank risk categories Risk culture

(illustrative) Risk strategy and appetite
Environmental
• Climate change ESG (incl. climate) risk
• Materials sourcing and use 1. Identify
• Energy efficiency Credit risk

• Environmental policy 6. Communi-

Market risk cate & report
2. Engage
Social
• Employment practices Risk
• Labour conditions Operational risk
governance
• Financial consumer
5. Monitor
protection Reputational/
and 3. Assess
Governance / other strategic risk escalate
• Corporate governance
Regulatory risk 4. Integrate
• Political accountability
How can Deloitte help?
Deloitte provides a full end-to-end solution to assist our clients to integrate ESG into their day-to-day operations, especially in focus
areas which will increasingly attract attention from governments, regulators, investors and other stakeholders in society.

Scenario analysis & stress testing Risk appetite, governance and

Identify, develop and implement climate risk reporting
scenarios in the existing stress testing Incorporate and integrate ESG risks (esp. climate
framework and ascertain your institution’s risk) and sustainability considerations to your risk
robustness and resilience management framework

Risk modeling & asset-liability

Regulatory valuation, including stranded assets
compliance Perform benchmarking with reference
Interpret new to Pillar 1 and Pillar 2A methodology on
regulations (e.g. HKMA existing ESG models
self-assessments and
further reviews), identify
and rectify any gaps in Sustainability strategy
your existing practices Analyse your existing ESG capability maturity,
to avoid potential non- and partner with you to develop and execute
compliance a sustainable finance framework

Contact Us

Tony Wood Denise Long Xi Chen

Partner Director Associate Director
Email: [email protected] Email: [email protected] Email: [email protected]
Herbert Yung Jessica Namad
Director Director
Email: [email protected] Email: [email protected]

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