Honorable Financial Secretary Mr. Paul Chan, Mr. Tan Yabo, Mr. Eddie Yue, Madam Selina Yan, Commissioner Wong Chuen Fai, Madam Julia Leung, Director General Wang Xin, ladies and gentleman, distinguished guests, good morning!
On behalf of HKGFA, I would like to extend my warmest welcome to all of you for attending this Sixth Annual Forum of Hong Kong Green Finance Association. I heard that over 500 people have registered to attend in person, and over 1,000 people are attending online. This is the largest HKGFA gathering since our inception in 2018.
Over the past few years, despite many challenges such as COVID, Hong Kong has made tremendous progress towards developing a global green finance hub. With strong govt leadership, Hong Kong has become one of the largest and most dynamic green bond markets in Asia, and has innovated a range of other green financial products including green loans, sustainability-linked products, ESG products, and more recently, carbon credits traded on the voluntary carbon market platform, namely the Core Climate. Hong Kong has also played an important role in driving the adoption of international sustainable finance standards such as the Common Ground Taxonomy (CGT) and the International Sustainability Standards Board (ISSB) reporting framework. We are also proud to see Hong Kong has become a sustainable finance knowledge hub, with many green finance and ESG training programs being offered by Hong Kong-based institutions.
In all these areas, HKGFA and its members have made their important contributions. As of now, HKGFA has developed a membership of over 160 organizations, including all major firms based in Hong Kong that offer green finance products and services. Over the past 12 months, HKGFA has organized and supported over 120 events for the purpose of building capacity for the industry, producing research reports and policy recommendations, and organizing dialogues between the industry and regulators, and between different GBA cities. These events make us one of the most active finance associations in the world.
In the area of capacity building, last year HKGFA co-organised in total five Green and Sustainable Finance certificate programs with HKUST and HKFSI. The programs are acknowledged as eligible programs under the Pilot Green and Sustainable Finance Capacity Building Support Scheme. HKGFA is also accredited as an SFC Continuous Professional Training (CPT) Provider. Since accreditation, HKGFA has organized at least eight CPT events, with over 1,000 participants from the green and sustainable finance related sectors.
As for research and policy advocacy, HKGFA has organized projects on topics such as application of Common Ground Taxonomy in Hong Kong and the GBA, decarbonization pathways for the GBA, climate change investment fund, and ESG enhancement for the private equity (PE) industry. As for the CGT study, we have published two reports already, Phase I and II; and today, Chaoni will represent the study group to release the Phase III report and recommendations.
Over the past year, HKGFA held the presidency of GBA Green Finance Alliance, and this alliance has organized seven working group on several cross-border issues such as harmonization of sustainable finance standards, mutual recognition of ESG services, joint effort to launch green PEs, and establishing an eco-system for green technologies. During the year of our presidency, we also organized face-to-face dialogue between GBA regulators and private sector including participants from Guangdong, Shenzhen, Hong Kong and Macao. Many thanks to Julia for hosting our GBAGFA event at the SFC a few months ago.
Looking to the future, and building on global trends of sustainable finance development, I would like to say a few words on key areas that require further collaboration between the public and the private sector, and where HKGFA can play a role:
First, establishing an eco-system for transition finance. I strongly believe that transition finance represents the mega trend for global sustainable finance development, especially in Asia where carbon intensity is high. This was highlighted in G20 Transition Finance Framework last year, and is now being practiced by many countries and financial institutions (Fis), including in mainland China. We will be hearing from Mr. Wang Xin of the People’s Bank of China (PBOC) that the Chinese central bank is drafting its transition taxonomy, and some cities in China have already come up with transition taxonomies, disclosure requirements, products, and incentives. I think, over the medium term, the amount of financing raised for transition will be larger than pure green finance for projects such as renewable and electric vehicles (EVs). Hong Kong should capture this opportunity by developing its transition taxonomy, transition-related disclosure rules, and innovate on all kinds of products linked to decarbonization performance.
Second, adoption of ISSB disclosure rule. ISSB has provided a global baseline for sustainability reporting, and Hong Kong is in a unique position to promote its adoption both locally and globally. If adopted locally, many Hong Kong listed companies, including mainland companies, will be on a fast track towards enhancing their sustainability reporting and will serve the purpose of demonstration and capacity building for other Chinese companies and for the rest of Asia. If Hong Kong becomes a leader in this space, it will also incubate a new industry of related services that help clients on carbon accounting, on climate risk analysis, on transition planning, and on application of digital technologies. I know that the SFC is actively working in this area, and I am looking forward to hearing what Julia is about to say to us today.
Third, adoption of a CGT-based taxonomy. Taxonomy, as an approach to identify and label green and transition activities, is one of the key pillars for sustainable finance, along with disclosure. The Common Ground Taxonomy, developed under the leadership of China and the European Union (EU), has contributed to the global interoperability in this area. Over the past year, more than a dozen Chinese issuers used CGT to issue international green bonds, most of which are arranged via Hong Kong (in fact by our HKGFA members), and over 200 Chinese green bonds are now labeled as CGT aligned and becoming more accessible by international investors. I believe Hong Kong can play a bigger role going forward. Hong Kong can develop and use a CGT-based taxonomy to label its green assets, to facilitate cross-border transactions of Chinese green assets, to incentivize green transactions, to verify green activities, and to help enhance capacities of other jurisdictions on taxonomy related topics. I am glad that the HKMA has already come up with a prototype of taxonomy and will share market feedbacks from the consultation process.
Fourth, developing a carbon market with stronger connectivity with mainland China. The Core Climate is a great start for Hong Kong to establish a globally recognized voluntary carbon market, which has the potential to become the next bright spot for Hong Kong green finance landscape. I think in the next stage, Hong Kong should consider developing its own carbon standard based on ICVCM’s Core Carbon Principles and Assessment Framework, and should develop mechanisms that can generate a much larger volume of demand and supply for higher quality carbon credits traded in Hong Kong. In addition, Hong Kong could explore the opportunity to work with China Certified Emissions Reduction (CCER), the Chinese domestic voluntary carbon market, on connectivity and interoperability between the mainland market and the international market. A mechanism similar to bond connect and stock connect can be considered for carbon connectivity to allow international investors to access CCER, with Hong Kong being the bridge.
To conclude, there are many exciting opportunities in front of us, especially for the Hong Kong green finance community, to make a meaningful contribution to the further growth of the sustainable finance market, and help arrange financing for both pure green and transition activities. HKGFA stands ready to build stronger partnership between the private sector and the public sector, to enhance capacity for the industry, and to facilitate transactions.
We just revamped our working group arrangement under the HKGFA to better serve these purposes. Under the new structure, we now have five working groups, working on banking & transition, standards and disclosure, product innovation, GBA collaboration, and real estate. And these working groups will host ten workstreams on more specific topics to drive innovation. I hope all members of HKGFA will more actively participate in our working groups and workstreams, contribute your knowledge and expertise, and enjoy your benefits as HKGFA members.
Let me thank all of you for attending our annual forum today and for your continuous support for HKGFA. I would also like to express my gratitude and special thanks to our Sponsors for this event: BOC (HK), HSBC, SCB, PWC, UBS, Miotech, Moody’s, Natixis, and S&P Global. Without their support, this event would not be possible.
I wish today’s event a great success. Thank you.
4 October 2o23