Climate Risk Assessment

Quantitative measurement is useful for our continuous risk monitoring and assessment of measures taken for strengthening of risk management. For climate change, we analyse climate scenarios and measure carbon emissions to understand the climate risk profile and resilience of our portfolios.

We leveraged the expertise of an external consultant to assess the resilience of the Exchange Fund’s Investment Portfolio (IP) under four climate scenarios (i.e. rapid transition, orderly transition, limited transition and failed transition) with varying degrees of expected transition and physical risks from extreme weather events over the short, medium and long term.

The IP has demonstrated resilience, as evidenced by the modest impact on returns across all analysed scenarios over the medium to long term. A more in-depth study revealed that the IP in general was better positioned for – or less impacted by – the climate transition shock than relevant market benchmarks. The analysis results further underscored the importance of our ongoing RI efforts in mitigating the risks associated with a failed transition scenario, which could be challenging for the IP, to enhance portfolio resilience.

More details of our climate scenario analysis can be found on:

Pages 35 of the Sustainability Report 2025,
Pages 37-38 of the Sustainability Report 2024,
Pages 39 of the Sustainability Report 2023,
Pages 22-23 of the Sustainability Report 2022, and
Pages 186-187 of the Sustainability Report in our Annual Report 2021

Net-Zero Emissions Target

To reinforce our commitment in supporting the global agenda to combat climate change and further bolster the Exchange Fund’s climate resilience, we have set a target of net-zero emissions¹ by 2050 for the IP.

¹ Carbon emissions according to the Greenhouse Gas Protocol.

Measuring Portfolio Carbon Emissions

Carbon emissions measurement enables us to understand the climate risk profile of our portfolios, track progress in decarbonisation and identify carbon-intensive areas that require further actions. Results from the analysis can also be used to guide the external managers to engage with targeted underlying companies with a view to reducing their carbon emissions.

Weighted average carbon intensity of public equities portfolios

Monitoring emissions from public equities portfolios takes precedence due to the higher reliability of measurement and disclosure practices in this asset class. This focus also aligns with the results from the climate scenario analysis, which indicate that public equities are more susceptible to climate risks compared to other asset classes within the Exchange Fund.

In alignment with industry practices, we measure the weighted average carbon intensity (WACI), expressed as tCO₂e/US$ million revenue (i.e. tonnes of carbon dioxide equivalent per unit of revenue), for the Exchange Fund’s portfolios. Scope 3 emissions are excluded due to limited data availability and the lack of a consistent calculation methodology at this stage.

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Source: MSCI and HKMA calculations

Note on use of information

Certain information ©2026 MSCI ESG Research LLC, reproduced by permission. Although the HKMA’s information providers, including without limitations, MSCI ESG Research LLC and its affiliates (the “ESG Parties”), obtain information (the “Information”) from sources they consider reliable, none of the ESG Parties warrants or guarantees the originality, accuracy and/or completeness, of any data herein and expressly disclaim all express or implied warranties, including those of merchantability and fitness for a particular purpose. The Information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used as a basis for, or a component of, any financial instruments or products or indices. Further, none of the Information can in and of itself be used to determine which securities to buy or sell or when to buy or sell them. None of the ESG Parties shall have any liability for any errors or omissions in connection with any data herein, or any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.

The WACI of the Exchange Fund’s public equities portfolios as at the end of 2024 was 110 tCO₂e/US$ million revenue, reflecting an overall 50% reduction compared to the 2017 level. This figure is lower than the market investment benchmark, indicating the Exchange Fund’s lower exposure to carbon-intensive assets relative to the broader market.

The pathway to net-zero is, however, non-linear. The decarbonisation of the Exchange Fund’s portfolios is subject to short-term fluctuations influenced by various factors beyond emissions alone, such as shifts in the portfolio asset mix, strategies in response to market dynamics and fluctuations in underlying asset valuations.

It is important to note that our net-zero strategy does not hinge on the exclusion of high-emission companies, but seek to support a whole-of-economy transition by engaging with companies and funding solutions that facilitate decarbonisation. Therefore, short-term increases in the WACI may occur before positive climate outcomes are realised in the longer run.

While WACI is a key metric for assessing the portfolios’ carbon exposure, it relies on disclosures from investee companies, which are inherently backward-looking and do not reflect the potential for future low-carbon transitions. We will remain vigilant in monitoring the latest developments in disclosure standards and measurement methodologies to identify suitable metrics for enhancing our climate exposure monitoring and reporting.

Last revision date : 27 July 2026