Hong Kong financial regulators launch sustainable finance steering group

The special administrative region aims to become a hub for green finance

The Hong Kong Monetary Authority (HKMA), the city-state’s de facto central bank, and its Securities and Futures Commission (SFC) have set up a sustainable finance steering group, in the latest green finance push from the region. 

The Green and Sustainable Finance Cross-Agency Steering Group will convene multiple authorities and government departments to tackle climate risk, boost green and sustainable finance and support the government’s climate strategies.

Alongside the founding financial regulators, the group consists of the Environment Bureau, the Financial Services and the Treasury Bureau, Hong Kong Exchanges and Clearing Limited (HKEX), the Insurance Authority and the Mandatory Provident Fund Schemes Authority.

Eddie Yue, Co-Chair of the Steering Group and Chief Executive of HKMA said climate risk was “highly relevant” to HKMA’s mandate.

“Climate change is a source of financial risk impacting the entire financial sector,” he said. “The transition will prompt structural adjustments to the global economy, bringing both risks and opportunities. Hong Kong can play a pivotal role in promoting sustainable development and powering the transition, especially in Asia.” 

The group will focus particularly on regulatory policy and market development, through technical working groups and consultation with experts and stakeholders.

The group met for the first time yesterday and set up two workstreams: to study and address cross-sectoral regulatory issues, and to coordinate cross-agency market development efforts.

Ashley Alder, Co-Chair of the Steering Group and CEO of the SFC, said the group would work to “ensure that companies disclose the impact of climate change on their businesses and that asset managers integrate climate factors into their investment processes”. 

“This will enable investors to price financial assets accurately and identify those companies which have developed credible strategic responses to the environmental challenges they face,” he added.  

This isn’t the first network to focus on sustainable finance in the city-state. HKMA set up the Centre for Green Finance (CGF) last year. At the time, it said there would be no crossover with the existing Green Finance Association (GFA), with the latter serving as the focal point for the private sector – to develop products and best practices for example – and the former representing the public sector and policy.

Green finance efforts have increasingly been emerging from government, regulatory and market players in the city-state. Last year the government launched a HK$100bn ($12.8bn) sovereign green bond programme, as well as the Green Finance Strategic Framework, an official framework seeking to “raise the credibility of green products” through improved reporting of environmental information and “emphasising climate-related disclosure”.

Also last year, HKMA announced a raft of measures to support the development of sustainable banking and green finance in the Asian financial hub, including a “greenness” review of banks and a call for asset managers to comply with local stewardship code, the Principles of Responsible Ownership. It also pledged to grow its green bond portfolio and prioritise “green and ESG investments”, starting with a $2bn commitment to an IFC ESG infrastructure fund for emerging markets through Hong Kong’s $470bn Exchange Fund.

For its part, HKEX will require listed companies to make a range of ESG disclosures, including on board expertise, climate risk, and demonstrating how they assess and manage ESG issues. Previous consultations on the measure revealed resistance from the city-state’s corporate community, notably from trade association the Chamber of Hong Kong Listed Companies. 

The SFC, meanwhile, is pushing for enhanced disclosure for green and ESG funds.