Company: HBCYF
Filing Date: 2025-02-20
Form Type: 20-F
Source: 0001089113-25-000040
Chunk: 356

Company: HSBC HOLDINGS PLC
Filing Date: 2025-02-20
Form: 20-F
Chunk 356
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 horizons, expressed as a multiple. 2 Values in the key represent the multiplier of increase in ECL, i.e. <1.1 equates to less than 10% increase over the counterfactual which excludes climate change impacts. Geographically, our most significant exposure is in Hong Kong, which was assessed in a bespoke exercise. This region has material physical risk exposure to wind and flooding due to strong tropical cyclones. However, in the HKMA exercise, a large proportion of CRE exposures were not materially impacted, with less than 0.5% of properties suffering from damage greater than 3% of their asset values per year. The properties are protected from cyclonic winds and flooding due to high building standards, high elevation, and protection from coastal defences in this region, such as rainstorm impacts being muted due to the positive impact of new drainage tunnels and tanks in the city. Overall, and in line with our assessment in prior years, our analysis shows our commercial real estate portfolio remains resilient to climate risk. Under our Below 2 Degrees scenario, impact severity is muted at the portfolio level as our counterparties have diversified property portfolios with insurance coverage being a key loan covenant. Under the Downside Physical Risk scenario, the impacts were observed to be heightened due to significant global weather events. We also observed impacts in the Severe Climate Stress scenario are more significant, which were driven by coastal inundation and flooding events. Our CRE modelling is subject to similar limitations as our retail mortgage climate models in regard to lack of historical data, reliance on exact building co-ordinates and information on building resilience. How we assess climate risk impacts on other risk types We use climate scenario analysis to assess the impacts on other risks including traded risk, sovereign credit risk, pension risk and non- financial risks. In 2024 for traded risk, we explored the potential fair value impacts of climate risks on our trading and banking portfolios across multiple scenarios, covering physical and transition risk climate drivers, and capturing short and long-term impacts. The analysis considered all relevant asset classes including interest rates, exchange rates, credit and equities, with market shocks capturing the impact of abrupt increases in carbon prices or physical risk perils resulting in structural economic impacts that affect the productivity of high-risk sectors at a country level . For s overeign credit risk we continued to assess the impacts of climate risks on sovereign debt under the different climate scenarios. For p ension risk we modelled balance sheet and income statement projections for the main defined benefit pension plans. This year’s exercise