Company: HBCYF
Filing Date: 2025-02-20
Form Type: 20-F
Source: 0001089113-25-000040
Chunk: 348

Company: HSBC HOLDINGS PLC
Filing Date: 2025-02-20
Form: 20-F
Chunk 348
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 analysis, risk management, and emissions reporting among other use cases. Climate riskmodelling is at a nascent stage, with challenges–including limitations in data availability, consistency and quality–shared across the industry.We have developed model risk procedures that set out the minimum control requirements for identifying, measuring and managing model riskfor climate-related models. All the identified climate-related models are subject to HSBC’s model lifecycle controls and policy.   |
| Financialreportingrisk | Climate risk impacts financial reporting risk through increased reporting requirements.The scope of financial reporting risk includes oversight of the accuracy and completeness of ESG and climate reporting. Our risk appetitestatement states that HSBC has no appetite for material errors in ESG disclosures in our key markets, balanced with the evolving requirementsand data availability.In addition, our internal controls incorporate requirements for addressing the risk of misstatement in ESG and climate reporting. To support this,a framework is used to provide guidance on control implementation over ESG and climate reporting and disclosures, which includes areas suchas process and data governance, and risk assessment. |

Challenges Key challenges include: – the diverse range of internal and external data sources and data structures needed for climate-related reporting, which introduces data accuracy and reliability risks; – data limitations on customer assets and supply chains, and methodology gaps, which hinder our ability to assess physical risks accurately; – industry-wide data gaps on customer emissions and transition plan and methodology gaps, which limit our ability to assess transition risks accurately; and – limitations in our management of net zero alignment risk due to known and unknown factors, including the limited accuracy and reliability of data, emerging methodologies, and the need to develop new tools to better inform decision making.

Insights from climate scenario analysis Climate scenario analysis supports our strategy by assessing our potential exposures to risks and vulnerabilities under a range of climate scenarios. It is one of the key tools used to support the evaluation of portfolios in line with our net zero ambition. The scenarios developed for climate scenario analysis are designed to examine HSBC’s financial performance and capital resilience across a wide range of potential climate outcomes. They are sufficiently diverse to enable HSBC’s key physical and transition risk vulnerabilities to be explored. For further details about these risks, see ‘Overview under Climate risk’ on page 249 . The analysis supports our approach to supporting our clients in the transition to net zero through assessing, where available, client level financial and credit risk metrics, and identifying where further analysis and climate risk focus is required. From a risk management perspective, it enhances our understanding of the various transition and global