Company: HBCYF
Filing Date: 2025-02-20
Form Type: 20-F
Source: 0001089113-25-000040
Chunk: 343

Company: HSBC HOLDINGS PLC
Filing Date: 2025-02-20
Form: 20-F
Chunk 343
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 on a fair value basis. Adjustments to trading income such as valuation adjustments are not measured by the trading VaR model. For information on the accounting policies applied to financial instruments at fair value, see Note 1 .2 on the financial statements.

Climate risk

| TCFD |

| Contents |                                         |
| 249      | Overview                                |
| 250      | Climate risk management                 |
| 251      | Embedding our climate risk approach     |
| 253      | Insights from climate scenario analysis |

Overview Our climate risk approach identifies two primary drivers of climate risk: – physical risk, which arises from the increased frequency and severity of extreme weather events, such as hurricanes and floods, or chronic gradual shifts in weather patterns or rises in the sea level; and – transition risk, which arises from the process of moving to a net zero economy, including changes in government policy and legislation, technology, market demand, and reputational implications triggered by a change in stakeholder expectations, action or inaction. In addition, we have also identified the following thematic issues related to climate risk, which are most likely to materialise in the form of reputational, regulatory compliance and litigation risks: – net zero alignment risk, which arises from the risk of HSBC failing to meet its net zero ambition or failing to meet external expectations related to net zero; and – the risk of greenwashing, which arises from the act of knowingly or unknowingly making inaccurate, unclear, misleading or unsubstantiated claims regarding sustainability to our stakeholders. Approach We recognise that the physical impacts of climate change and the transition to a net zero economy can create significant financial risks for companies, investors and the financial system. HSBC may be affected by climate risks either directly or indirectly through our relationships with customers, which could result in both financial and non-financial impacts. Our climate risk approach aims to effectively manage the material climate risks that could impact our operations, financial performance and stability, and reputation. It is informed by the evolving expectations of our regulators. We continue to develop our approach and climate risk capabilities across our businesses, by prioritising sectors, portfolios and counterparties with the highest impacts, and recognise that this is a long-term iterative process. This includes increasing coverage and incorporating more mature data, climate analytics, frameworks and tools, and responding to emerging industry best practice and climate- related regulations. This also necessitates reflecting on how climate risk continues to evolve in the real world, and improving how we embed climate risk factors into strategic planning, transactions and decision making across our businesses.