Synpulse RegWatch: May 2025

HKSFC: Cross-Agency Steering Group sets 2025 priorities to support growth of sustainable finance in Hong Kong (Published: 6 Feb 2025)

• Sustainability Disclosure: The steering group will support the implementation of ISSB Standards, focusing on sustainability reporting, creating assurance frameworks, and offering capacity-building programs in collaboration with industry stakeholders.
• Sustainable Finance Hub: The steering group aims to expand the Hong Kong Taxonomy to include transition elements and new sustainable activities. It will also develop sector-specific guidance for transition finance and establish a Transition Finance Knowledge Hub to bolster Hong Kong’s role in carbon trading.
• Data and Technology: In partnership with the industry, the steering group is set to release the Hong Kong Green Fintech Map in 2025, leveraging green fintech solutions to mobilise sustainable capital and enhance data transparency and accessibility.
• Banks should accelerate readiness for ISSB-aligned sustainability disclosures by strengthening data, systems, and governance.

HKMA: Adoption Practice Guide on Greentech in the Banking Sector (Published: 18 Feb 2025)

• The HKMA identified Greentech as a key fintech focus area to help banks tackle climate-related challenges. Banks are encouraged to assess their current climate risk exposure, identify gaps, and integrate net-zero strategies into their core business plans.
• Scenario analysis and climate-related stress testing are recommended to assess the financial materiality of climate risks.
• Greentech tools can help banks monitor client emissions, assess risk exposure, and identify sustainable lending opportunities.
• Sustainability strategies should be clear, measurable, and realistic, following SMART frameworks to set climate goals, with profit centres like lending and investment teams embedding climate considerations into product development and client assessments.
• Banks should actively integrate Greentech solutions into their risk management, product solutions, and disclosure processes to accelerate sustainable finance goals.

HKMA: Climate Risk Stress Test 2.0 (Published: 28 Feb 2025)

• The HKMA ran the Climate Risk Stress Test 2.0 (CRST 2.0) with strong support from the banking industry to assess how banks would perform under both short-term and long-term climate risk scenarios.
• The results showed that Hong Kong’s banking sector is generally resilient to severe climate-related shocks across different scenarios.
• An orderly transition to a low-carbon economy was found to be more favourable for the banking sector over the long term.
• Many banks have improved their climate stress testing capabilities, especially in areas like data collection, risk assessment methods, model governance, and use of advanced technologies like AI.
• Banks should enhance climate risk stress testing by refining sectoral exposures, improving data granularity, incorporating long-term physical and transition risks based on HKMA’s Climate Risk Stress Test 2.0 framework.

MAS: Consultation Paper on the Proposed Amendments to Anti-Money Laundering and Countering the Financing of Terrorism Notices for Financial Institutions and Variable Capital Companies (Published: 8 Apr 2025)

• Proliferation Financing (PF): Clarified that Money Laundering/Terrorism Financing assessments include PF assessments.
• Trust framework enhancements: Amendments under the TCA and Trustees Act expand the definition of "trust relevant parties" and the information trusts must collect and maintain, aiming to prevent misuse.
• Suspicious transaction reporting timelines: Clearer timelines are proposed: within 15 days of escalation by a relevant officer, within 5 business days from forming suspicion, and within 1 business day for sanctions breaches. Institutions must prioritise high-risk cases and establish proper escalation and mitigation procedures.
• MAS has clarified expectations regarding screening, establishing source of wealth/funds (SOW/SOF), identifying high-risk shell companies, and more.
• Banks should proactively review and update their existing AML policies, risk assessment frameworks, and transaction monitoring tools to ensure they can meet the proposed MAS requirements—particularly around proliferation financing, timely suspicious transaction reporting, and enhanced screening obligations.