Hong Kong eyes carbon market opportunities, plans adaptation of IFRS sustainability standards

New regulatory-backed bodies will look into sustainable finance developments

Regulators in Hong Kong have launched a task force to study the feasibility of developing the city state into a regional carbon trading hub.

The newly-created Carbon Market Work Stream (CMWS) will be co-headed by financial regulator the Securities and Futures Commission (SFC) and the Hong Kong Exchange (HKEX), and will assess potential opportunities within cap-and-trade and voluntary carbon markets in China and internationally.

The announcement comes as China’s long-awaited national emissions trading programme – set to be the world’s largest – launches today.

The workstream said in a statement that Hong Kong was well positioned “to play a strategic role as China’s gateway and mobiliser of capital to facilitate the national carbon neutrality goal” due to its role as a global financial centre.

The CMWS will be overseen by the Green and Sustainable Finance Cross-Agency Steering Group. Responsible for coordinating Hong Kong’s sustainable finance strategy across different government agencies,  the Group is co-chaired by Hong Kong’s central bank and the SFC, and members include representatives from the Environment Bureau, Financial Services and the Treasury Bureau, HKEX, the Insurance Authority and pensions administrator the Mandatory Provident Fund Schemes Authority.

Separately, the Steering Group launched a Centre for Green and Sustainable Finance to house resources that will help market participants manage climate change. The centre has identified “talent” and ESG data as initial focus areas and has set up working groups to help promote their development.

The Steering Group will also collaborate with Hong Kong’s Financial Reporting Council and its Institute of Certified Public Accountants to adapt international climate reporting standards for domestic use. The International Financial Reporting Standards Foundation is currently overseeing the development of those standards, which are expected to be issued by the middle of 2022.

“Hong Kong can lead the way in climate reporting by adopting the first set of global sustainability standards to ensure that consistent, comparable and reliable information is available to help investors understand the extent to which their portfolios are exposed to climate risks and they are financing emissions,” said Ashley Alder, SFC chief and Steering Group Co-Chair. 

In addition to its domestic initiatives, the Steering Group is represented on the EU’s International Platform on Sustainable Finance, which is developing a ‘Common Ground’ taxonomy for international use, derived from the EU’s green taxonomy.

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