Asia banks show mixed climate risk readiness, report finds

HSBC, Mizuho, and China Construction Bank stand out.

Climate risk management readiness among the world’s biggest banks remains uneven, with Asia producing both some of the strongest performers and some of the clearest gaps, according to a Morningstar Sustainalytics analysis of 29 global systemically important banks.

The report said HSBC Holdings and Japan’s Mizuho Financial Group were among the best-prepared banks for carrying out climate risk assessments and using the results, whilst China Construction Bank was rated strong on carbon transition resilience.

Sustainalytics said European and UK banks still generally lead overall, but Asia’s picture is mixed rather than uniformly weak.

At the weaker end, the report said some Chinese institutions lag their peers, particularly in quantitative assessment and disclosure. It also identified ICBC and Mitsubishi UFJ Financial Group as weak on climate risk strategy and management alignment.

Sustainalytics said regulatory pressure in Asia is building quickly. Authorities in Singapore and China are expected to implement ISSB-based sustainability disclosure rules by 2026 and 2027, respectively, whilst regulators in Hong Kong and Japan have set out a roadmap for decarbonising lending portfolios.

The analysis said all 29 banks had established climate governance structures aligned with the Task Force on Climate-related Financial Disclosures, but only 16 had linked executive pay to climate targets as of 11 September 2025.

Banks without such links were concentrated mainly in the US and China, with Bank of Communications and ICBC named among those trailing peers on this measure.

On scenario analysis, only three of the 29 banks achieved very strong or strong performance on Sustainalytics’ low carbon transition resilience measure.

HSBC and Mizuho were rated very strong, whilst China Construction Bank was rated strong, underscoring Asia’s presence among the leaders even as other regional banks remain behind.

The report also said 14 of the 29 banks had started integrating climate into internal capital adequacy assessments, whilst only eight used climate scenario analysis to inform internal liquidity planning.

Sustainalytics said stronger climate risk management could help banks cut long-term compliance costs, strengthen trust with regulators and investors, and improve resilience as climate-related financial risks become more central to bank supervision.