Hong Kong government launches framework to spur green finance

Initiative aims to tackle corporate “box-ticking exercise”

The Hong Kong government has launched an official framework seeking to “raise the credibility of green products offering” through improved reporting of environmental information and “emphasising climate-related disclosure”.

The “Green Finance Strategic Framework” was authored by the Securities and Futures Commission (SFC), one of the four financial regulators in the city-state with oversight of domestic financial institutions and the capital markets.

The paper describes enhanced disclosure as material to a wide range of market participants by “improving the pricing of climate-related risks and opportunities”, in turn enabling more informed investment decisions.

The SFC cites China’s policy direction which targets mandatory environmental disclosure by 2020, and the Task Force on Climate-related Financial Disclosures (TCFD) recommendations as important considerations to climate-related disclosure.

It additionally takes aim at a number of listed companies which “treat reporting as a routine, box-ticking exercise to fulfil regulatory requirements”, warning that this could “hinder investors”.Effective 2017, all listed companies on the Hong Kong Stock Exchange (HKEx) were required to comply or explain with disclosure of environmental key performance indicators (KPIs).

General reporting was first introduced on the Exchange as voluntary in 2013. The scope of disclosure was expanded and upgraded to comply or explain three years later, in 2016.

The new framework also emphasises green finance as a “top priority” of China, and affirms the role of Hong Kong to “complement the Mainland’s green development ambitions and to connect green finance flows between the Mainland and the rest of the world”.

However, the framework stops short of providing actual policy. Instead, the SFC “aims to discuss” how it could contribute to the further development of green finance.

The city-state has been making strides in this field ever since the release of a 2016 report by the Hong Kong Financial Services Development Council (FSDC) on green finance, which culminated in the announcement of a HK$100bn ($12.8bn) sovereign green bond program earlier this year, the largest of its kind to-date. Link