Hong Kong Positions Itself as a Global Leader in Green Finance

In its pursuit to solidify its status as a global hub for green and sustainable finance, the Hong Kong Monetary Authority (HKMA) is gearing up to introduce a transition finance framework aimed at facilitating the journey of carbon-intensive firms towards achieving net-zero emissions. This initiative underscores the city’s commitment to fostering environmental sustainability while bolstering its financial sector.

Deputy CEO of HKMA, Darryl Chan Wai-man, revealed that the groundwork for a local “green taxonomy” framework has been laid, focusing on categorising economically viable activities that are environmentally friendly or sustainable. The imminent step involves expanding this framework to encompass transition financing, a move expected to provide vital support for the city’s aspirations to become a beacon of green finance on the global stage.

“Transition finance plays a pivotal role in steering companies away from carbon-intensive practices towards climate-neutral operations, aligning with worldwide green objectives,” Chan emphasised. Establishing a standardised taxonomy for transition financing is deemed essential to ensure uniformity among financial institutions in issuing bonds and loans in this domain.

The impetus for developing transition finance aligns with the strategic priorities outlined by the Green and Sustainable Finance Cross-Agency Steering Group, a collaborative body comprising financial regulators such as the Securities and Futures Commission, the HKMA, and other government bureaus. This group, established in May 2020, aims to expedite the growth of green and sustainable finance in Hong Kong.

Chan highlighted the intricate process involved in formulating a transition taxonomy, noting the ongoing efforts worldwide, including initiatives by the EU, ASEAN, and mainland China. Notably, recent endeavours in Shanghai and Singapore have yielded transition taxonomies delineating activities conducive to climate change mitigation across various sectors.

Drawing inspiration from global counterparts, HKMA aims to craft a transition taxonomy that harmonises with prevailing international standards, minimising disparities across jurisdictions. Chan emphasised the collaborative approach, citing the consultation launched in May to solicit input for developing a prototype green classification framework, which identified key sectors applicable to Hong Kong.

The unveiling of the prototype framework is slated for rollout to banks and other financial sectors, serving as a benchmark for identifying green economic activities. As part of its commitment to fostering dialogue and collaboration, HKMA, in conjunction with the International Finance Corporation, is hosting the “Climate Business Forum: Asia-Pacific” during the government’s Green Week, showcasing Hong Kong’s strides in green finance.

Reflecting on the city’s progress, Chan revealed that as of February 22, green bonds totalling US$25 billion had been issued by the government, financing diverse eco-friendly projects. Looking ahead, HKMA plans to deepen ties with global counterparts, including organising a climate finance event with the Dubai Financial Services Authority, aimed at accelerating the flow of transition finance between the Middle East and Asia.

In essence, Hong Kong’s proactive measures in fostering green and sustainable finance underscore its commitment to environmental stewardship while positioning itself as a frontrunner in shaping the future of global finance. Through collaborative initiatives and steadfast dedication, the city endeavours to pave the way towards a greener, more sustainable financial landscape.