Hong Kong’s Green and Sustainable Finance Cross-Agency Steering Group announced yesterday its green and sustainable finance strategy for the territory.
Since its establishment in May 2020, the Steering Group has been stepping up its effort to coordinate climate change and sustainability issues in the financial sector across different agencies in Hong Kong, while supporting international initiatives and alignment.
The Steering Group’s strategic plan sets out six key focus areas for strengthening Hong Kong’s financial ecosystem to support a greener and more sustainable future in the longer term. These are:
strengthening climate-related financial risk management;
promoting the flow of climate-related information at all levels to facilitate risk management, capital allocation and investor protection;
enhancing capacity building for the financial services industry and raising public awareness;
encouraging innovation and exploring initiatives to facilitate capital flows towards green and sustainable causes;
capitalising on opportunities in mainland China to develop Hong Kong into a green financial centre in the Guangdong-Hong Kong-Macao Greater Bay Area; and
strengthening regional and international collaboration.
The Steering Group has agreed to implement five near-term action points:
Climate-related disclosures aligned with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations will be mandatory across relevant sectors no later than 2025. Building on the existing requirements of listed companies to provide climate-related disclosures for financial years commencing on or after 1 July 2020, as well as initial steps taken with respect to banks and asset managers, the Steering Group will take active steps to enhance climate-related disclosures of financial institutions including insurance companies, banks, asset managers, and pension trustees, and increase the coverage of mandatory disclosure as soon as practicable, so that more information on how companies and assets will be impacted by climate change is available in the financial markets to support informed capital allocation and promote market discipline.
Aim to adopt the Common Ground Taxonomy, which will be developed by mid-2021 by the International Platform on Sustainable Finance (IPSF) Working Group on Taxonomies co-led by China and the EU. The Hong Kong Monetary Authority (HKMA) and Securities and Futures Commission (SFC) have now also joined the IPSF.
Support the International Financial Reporting Standards Foundation’s proposal to establish a new Sustainability Standards Board for developing and maintaining a global, uniform set of sustainability reporting standards. The Steering Group will also support complementary efforts by other standard-setting organisations to converge sustainability reporting standards globally.
Promote climate-focused scenario analysis to assess the impacts on financial institutions under different climate pathways, such as through the pilot climate risk stress testing exercise for banks and insurers, and the use of scenario analysis by large asset managers. These initiatives are an integral part of the Steering Group’s actions to require financial institutions to embed climate considerations into their business processes, including risk management, as well as an effective means to identify any gaps in data and know-how for future enhancement.
Establish a platform to act as a focal point for financial regulators, government agencies, industry stakeholders and the academia to coordinate cross-sectoral capacity building, thought leadership and as a cross-sectoral repository of green and sustainable finance resources in addition to the Sustainable and Green Exchange (STAGE).
The Steering Group is co-chaired by the HKMA and the SFC, with members comprising the Environment Bureau, the Financial Services and the Treasury Bureau, Hong Kong Exchanges and Clearing Limited, the Insurance Authority and the Mandatory Provident Fund Schemes Authority.
Mr Ashley Alder, co-chair of the Steering Group, and SFC CEO, said, “The private sector undoubtedly has a vital role to play in directing capital to activities which lower carbon emissions over time and our plan is directed to mobilising significant volumes of private investment. Hong Kong’s plan will also have a major impact globally; the extremely large footprint and international significance of Hong Kong’s HK$ 45.7tn ($6tn) capital markets means that they will play a critical role in the overall effort to reach net-zero goals.”
Mr Eddie Yue, co-Chair of the Steering Group, and chief executive of HKMA, said, “The Steering Group recognises the need and the urgency to tackle climate and environmental risk and transition to a more sustainable economy. Finance is key to driving that change. By consolidating our existing strengths and expertise and developing new and innovative capabilities, Hong Kong hopes to leverage on our role as an international financial centre to support Hong Kong’s 2050 carbon neutrality goal and mobilise capital towards driving sustainable action in this region.”