Hong Kong needs a green taxonomy that encompasses both the city and the mainland to help lenders structure products effectively, the Hong Kong Green Finance Association says.

And to this end, industry leaders and top officials will seek ways to help the city develop its very own green taxonomy when the association holds its annual forum next Wednesday, chairman and president Ma Jun said.

In simple terms, a green taxonomy is a classification system that helps lenders and investors know which businesses meet environmentally sustainable criteria and objectives.

HKGFA members come from a range of key sectors including banks, insurers, consultants and even education institutions and Ma, who is also a member of the People’s Bank of China’s monetary policy committee, said Hong Kong can’t afford to wait for China to roll out its own green taxonomy.

The PBOC has identified four sectors – steel, cement, petrochemicals and agriculture – for transition finance and is currently working on the criteria for steel, which will be used as a template for the other sectors.

“How do you allocate incentives, measure effect, and build products if you use a mix of taxonomy? It’s not credible,” he said.

Despite high interest rates, he is confident that green bond issues will rise as the US will cut rates after they peak.

Sustainable bonds grew by 15 percent in the first half globally to US$470 billion (HK$3.66 trillion), Europe, the Middle East and Africa contributed the most, Asia ranked the second, and US declined, said Chaoni Huang, HKGFA executive vice president. Hong Kong issued US$13.2 billion worth of green bonds in the first half.

Source: The Standard