Caixin
May 08, 2019 03:38 AM
FINANCE

Hong Kong Moves to Green Up Financial Sector

Hong Kong Monetary Authority unveils measures to promote green finance and sustainable banking. Photo: IC Photo
Hong Kong Monetary Authority unveils measures to promote green finance and sustainable banking. Photo: IC Photo

Hong Kong’s monetary authority unveiled a plan Tuesday to set up a new regulatory framework promoting financial activities that target environmental friendly projects, responding to Beijing’s calls to make the city a green finance hub in the Greater Bay Area.

The Hong Kong Monetary Authority (HKMA) outlined a three-phase plan to bolster green finance in the city. The first step will develop a framework in one year following international standards to provide a “baseline” for banks to follow, according to the HKMA. The authority will partner with international organizations to offer technology support for Hong Kong banks and assess their green finance practices.

Green finance refers to fundraising and investment targeting for sustainable development projects and low-carbon technologies. Compared with traditional financial investment, green finance takes into account environmental and climate factors in investment decisions in addition to returns.

“Climate change is one of the major risks threatening the well-being of mankind. It must be tackled on a global basis and across different sectors of the economy,” HKMA Chief Executive Norman Chan Tak-lam said Tuesday at a forum on green finance. “How the banking and financial system operates will clearly have an impact on the way in which climate risk is managed or reduced.”

China’s financial authorities have placed the development of green finance high on its policy agenda. The country raised more than $10 billion via green bonds in 2018, accounting for half of the total raised in the Asia Pacific region last year. More than $100 billion of green bonds were raised globally in 2018, a record-breaking year.

Once the Hong Kong framework is ready, the HKMA will discuss with the industry setting up detailed goals for green finance. The authority will closely monitor and assess progress made by banks, the HKMA said without giving a timeline.

The measures are designed to improve the Hong Kong banking sector’s capability to deal with climate change risks and achieve sustainable finance.

In a key state strategy to develop the Greater Bay Area, the central government vowed to make Hong Kong a hub of green finance.

Hong Kong is already one of the major green bond markets in the world with total issuance of $11 billion from global issuers such as the World Bank, the Asia Development Bank and the European lnvestment Bank. Hong Kong's sovereign wealth fund, managed by the HKMA, was one of the earliest investors in the green bond market.

The city authority rolled out a series of policies over the past year to support green bond issuance, including tax reductions. Paul Chan Mo-po, Hong Kong’s financial secretary, said recently that the city plans to raise HK$100 billion ($12.7 billion) via green bonds to support environment-related projects in the city.

According to the HKMA, a survey of 47 major banks in Hong Kong found that 60% of them have set up plans to promote green finance and sustainable banking. More than half of the banks said they have made arrangements to address climate change risks. But the banks called for standardized measurements and methods to assess such risks.

The HKMA also announced a plan to establish the Centre for Green Finance (CGF) under the HKMA Infrastructure Financing Facilitation Office to provide technology assistance and an information-sharing platform for green finance.

Contact reporter Han Wei (weihan@caixin.com)

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