Investors Press UK Audit Regulator to Examine HSBC’s Climate Risk Accounting
A coalition of institutional investors has called on Britain’s Financial Reporting Council to review whether HSBC’s financial statements adequately reflect climate-related risks and auditing standards
A group of institutional investors has formally urged the United Kingdom’s accounting regulator to scrutinise HSBC’s most recent financial statements and audit process, amid concerns that the bank may be underestimating the financial risks linked to climate change.
In a letter addressed to the Financial Reporting Council, the investors requested a review of HSBC’s 2025 accounts to determine whether they properly capture material climate-related exposures and whether the auditing work conducted by PricewaterhouseCoopers provides sufficient assurance over those disclosures.
The correspondence was also shared with the bank and the Prudential Regulation Authority.
The signatories include several major asset owners and managers, among them Sarasin & Partners, the National Employment Savings Trust, Merseyside Pension Fund, Lombard Odier Investment Management, and Edentree Investment Management.
Collectively, they argue that existing disclosures do not offer adequate transparency on how climate risks are reflected in HSBC’s capital resilience and financial modelling.
According to the investors, there is limited clarity on how the bank’s auditor has assessed HSBC’s approach to climate risk accounting.
They also contend that HSBC’s current financial statements may not fully reflect exposure to physical risks such as floods and wildfires, or transition risks stemming from regulatory and economic shifts linked to decarbonisation.
HSBC’s most recent reporting has concluded that it does not expect significant short- to medium-term financial impacts from climate change, although it acknowledges broader uncertainty over long-term outcomes.
The investors, however, describe this assessment as potentially overly optimistic given the scale of the bank’s global lending exposure.
The group further states that it has engaged with HSBC’s audit committee leadership and senior management since 2023, but claims there has been limited visible progress in strengthening disclosure practices or revising underlying assumptions.
They are calling for a formal review of how climate-related risks are integrated into critical accounting judgments, including the introduction of sensitivity analyses under more severe climate scenarios.
Among additional concerns raised is the governance structure surrounding the bank’s audit oversight, including the dual role held by its chairman in relation to the audit committee, which investors say could raise questions about independence in oversight processes.
The Financial Reporting Council has confirmed receipt of the request but has not commented further.
The auditor involved has also declined to respond, while HSBC has not issued an immediate public statement in response to the investor letter.
The appeal comes amid growing pressure across the financial sector for banks to align accounting practices with increasingly detailed climate risk frameworks, as regulators and investors push for more rigorous disclosure standards on environmental exposure and long-term financial stability.
In a letter addressed to the Financial Reporting Council, the investors requested a review of HSBC’s 2025 accounts to determine whether they properly capture material climate-related exposures and whether the auditing work conducted by PricewaterhouseCoopers provides sufficient assurance over those disclosures.
The correspondence was also shared with the bank and the Prudential Regulation Authority.
The signatories include several major asset owners and managers, among them Sarasin & Partners, the National Employment Savings Trust, Merseyside Pension Fund, Lombard Odier Investment Management, and Edentree Investment Management.
Collectively, they argue that existing disclosures do not offer adequate transparency on how climate risks are reflected in HSBC’s capital resilience and financial modelling.
According to the investors, there is limited clarity on how the bank’s auditor has assessed HSBC’s approach to climate risk accounting.
They also contend that HSBC’s current financial statements may not fully reflect exposure to physical risks such as floods and wildfires, or transition risks stemming from regulatory and economic shifts linked to decarbonisation.
HSBC’s most recent reporting has concluded that it does not expect significant short- to medium-term financial impacts from climate change, although it acknowledges broader uncertainty over long-term outcomes.
The investors, however, describe this assessment as potentially overly optimistic given the scale of the bank’s global lending exposure.
The group further states that it has engaged with HSBC’s audit committee leadership and senior management since 2023, but claims there has been limited visible progress in strengthening disclosure practices or revising underlying assumptions.
They are calling for a formal review of how climate-related risks are integrated into critical accounting judgments, including the introduction of sensitivity analyses under more severe climate scenarios.
Among additional concerns raised is the governance structure surrounding the bank’s audit oversight, including the dual role held by its chairman in relation to the audit committee, which investors say could raise questions about independence in oversight processes.
The Financial Reporting Council has confirmed receipt of the request but has not commented further.
The auditor involved has also declined to respond, while HSBC has not issued an immediate public statement in response to the investor letter.
The appeal comes amid growing pressure across the financial sector for banks to align accounting practices with increasingly detailed climate risk frameworks, as regulators and investors push for more rigorous disclosure standards on environmental exposure and long-term financial stability.
