HKGFA published research report: Developing Hong Kong as a Leading Investment Fund Hub for Green and Sustainable Infrastructure Financing

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Hong Kong, 22 February 2022 – Hong Kong Green Finance Association (“HKGFA”) published a research report on 4 February 2022, entitled Developing Hong Kong as a Leading Investment Fund Hub for Green and Sustainable Infrastructure Financing, which outlines recommendations for the Hong Kong Government on enhancing its legal, tax and regulatory environment to facilitate or attract the setting up of green and sustainable investment funds in Hong Kong. 

The report aims at exploring Hong Kong’s potential as a regional financial hub for attracting capital to finance infrastructure projects that are green and sustainable, in light of the urgent need to transition to a low carbon or net zero economy. It focuses on aspects ranging from potential tax incentives to investment fund structures to providing guidance on the identification of green and sustainable infrastructure (“G&S Infra”) projects. It also compares the development of capital market for green and sustainable infrastructure financing in three APAC jurisdictions, namely Australia, Singapore, and Hong Kong. 

Dr. Stephen Wong, HKGFA Vice President and Policy Research and Dissemination Working Group Co-chair; Our Hong Kong Foundation Senior Vice President & Executive Director of Public Policy Institute said, “Infrastructure plays a crucial role in the operation of global economy. Emission-intensive industries such as energy, transportation and communication—if supported by the right infrastructure and investment—can serve as key enablers for the transition to a low-carbon economy. As an international financial centre with a well-established financial platform, Hong Kong can help to channel funding from capital market towards investments in sustainable infrastructure in order to promote sustainability and achieve a ‘greener’ economy.” 

Florence Yip, Project Lead of HKGFA Policy Research and Dissemination Working Group; Senior Advisor of PwC Hong Kong added, “In order to develop Hong Kong as a leading investment fund hub for green and sustainable infrastructure financing, Hong Kong must establish itself as a role model for green and sustainability. This requires relentless efforts to harmonise the standards for such infrastructure in Hong Kong, and to improve its legal and regulatory environment, as well as its tax regime and incentives. Coordinated efforts of governments, private sectors and the public are much needed to achieve the desirable scale and scope.” 

To further strengthen Hong Kong’s position as a regional asset and wealth management centre and develop the city as a leading investment fund hub for green and sustainable infrastructure financing covering both private and public funds, the report proposes four key recommendations to the Hong Kong Government: 

  1. Prioritise reviewing and revising the relevant tax policies and incentives in Hong Kong to cater for varied scopes of infrastructures such as “new infrastructure”, “green infrastructure”, “sustainable infrastructure” and encourage funds’ investments in such projects;
  2. Recommend the Mandatory Provident Fund Authority (MPFA) to promote investments with green and sustainable impacts by mandating MPF fund managers to allocate a certain percentage of their portfolios to ESG or climate-related products, and considering infrastructure as an eligible asset class on the MPF platform; 
  3. Recommend the Financial Services and the Treasury Bureau (FSTB) to propose in the 2022-23 Hong Kong Budget to include the set-up of limited partnership funds (LPFs) in Hong Kong or the re-domiciliation of offshore limited partnership funds to LPFs in Hong Kong in the subsidy scheme; 
  4. Recommend introducing policies that further facilitate cross-border G & S Infra investments; for example, with the REITs market becoming more robust in both Hong Kong and Mainland China, investment products such as green and sustainable infrastructure REITs listed in Hong Kong may be made accessible to Mainland investors and vice versa. 

In addition to the four key recommendations, the report also outlines further recommendations for the Hong Kong Government on encouraging best practices in sustainability to be applied to G & S Infra projects. For instance, provide guidance to the construction of infrastructures in the proposed Northern Metropolis and the Lantau Tomorrow Vision development plans to ensure they satisfy the recommended green or sustainable standards from the outset; collaborate with cities in the GBA and beyond for strategic infrastructure planning, standard-setting and carbon emissions data collection. 

Moreover, the enhancement of Hong Kong’s legal and regulatory environment can also facilitate investors and asset owners’ investment in G & S Infra projects. The report suggests that Hong Kong’s Exchange Fund and Future Fund can take the lead and invest in Hong Kong G & S Infra initiatives, or even set up dedicated portfolios to invest in early-stage infrastructure projects in the GBA. 

Climate resilience and sustainable development are inextricably intertwined. With the global awareness of climate risks and the call for a green and sustainable future rising to an unprecedented level, it is also time for Hong Kong to leverage its strength in financial services to deliver green and sustainable impacts. 

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About Hong Kong Green Finance Association

Founded in September 2018, Hong Kong Green Finance Association (HKGFA) provides a unique platform that supports the development of green finance and sustainable investments in Hong Kong and beyond. It aims to mobilise both public and private sectors resources and talents in developing green finance policies, to promote green finance business and product innovation within financial institutions. HKGFA’s main goal is to position Hong Kong as a leading international green finance hub by providing greater access and opportunities for Hong Kong’s financial institution to participate in green financing transactions locally, in Mainland China and in markets along the Belt & Road. This is in line with the global trend of implementing the UN sustainable development goals and the Paris Agreement. 

HKGFA’s key activities are organised through eight working groups, namely Green and Sustainable Banking, Green and Sustainable Private Equity, Green and Sustainable Real Estate, Green Bonds and Product Innovation, ESG Disclosure and Integration, Policy Research and Dissemination, Green and Sustainable Insurance, and External Collaborations. Please visit https://www.hkgreenfinance.org/ for more information.

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