HSBC has hosted a closed-door meeting with senior figures from major UK banks as regulators and investors intensify calls for clearer reporting on climate-related risks within lenders’ loan portfolios, the Financial Times reported citing unnamed sources.
The report said representatives from HSBC, Barclays, Santander, NatWest and Lloyds gathered at HSBC’s Canary Wharf offices last week to discuss how to meet stricter expectations around financial disclosures.
Three people familiar with the discussions told the FT that the talks focused on compliance with tougher reporting standards.
Several investors also attended, along with the Institute of Chartered Accountants in England and Wales.
The ICAEW confirmed it was present but did not comment further, the FT said.
The meeting, involving accounting and risk specialists from the banks, took place before HSBC’s annual general meeting, at which the lender defended its move to loosen limits on financing fossil-fuel businesses.
Central banks have repeatedly cautioned that climate-related events such as flooding, wildfires and sea-level rise could lead to more defaults by households and companies.
Wider economic changes, including elevated inflation and interest rates, may also reduce banks’ capacity to withstand such losses.
UK banks and insurers have until next month to review whether they meet revised climate-risk supervisory standards issued last year by the Prudential Regulation Authority (PRA).
Under those requirements, banks must more clearly reflect climate risk in financial statements through “expected credit losses”, the accounting measure used to estimate likely losses when borrowers fail to repay.
In 2024, PRA executive director David Bailey warned CFOs at leading UK banks about shortcomings in the way lenders were identifying borrowers and sectors most exposed to climate-related risks.
He also pointed to banks’ decisions not to report any material “post-model adjustments” related to climate risk.
Some investors, including UK asset manager Sarasin, Denmark’s AkademikerPension and UK workplace pension scheme Nest, have written to the Financial Reporting Council asking it to examine whether HSBC’s accounts and PwC’s audit understated climate risks that were financially significant to the bank.
Banks across the UK and EU have begun disclosing such risks, though the level of detail varies.
ING said in its latest accounts that the International Financial Reporting Standard for expected credit losses did not fully reflect some of the “novel” risks created by climate change. The bank made a discretionary adjustment of €47mn to expected credit losses.
HSBC disclosed this year that climate change had led to an impairment of less than $50m in expected credit losses, although that disclosure appeared outside its audited financial statements.
NatWest stated in its accounts that it does not include physical and transition risks from climate change in its expected credit loss framework, except for considering possible UK policy scenarios in its macroeconomic outlook.
One person at the meeting told the FT that investors saw a “mismatch” between their own assessment of heightened climate risk and the way banks incorporate those risks into loss models.
