In the 2018-19 budget, the Hong Kong government unveiled the Green Board Programme to support green projects of companies by encouraging them to seek financing through the city’s capital markets.
As early as June last year, the authorities rolled out the Green Bond Grant Scheme (GBGS) to subsidize eligible green bond issuers in obtaining certification under the Green Finance Certification Scheme (GFCS), a program launched early last year by the Hong Kong Quality Assurance Agency (HKQAA) to provide issuers with third-party conformity assessments of their green financial instruments.
According to a market briefing by Climate Bonds Initiative (CBI), a total of US$11 billion (HK$85.8 billion) of green bonds were arranged and issued in the city in 2018, 83 percent of the total, or US$9 billion, were by non-Hong Kong-based entities, suggesting that Hong Kong is an attractive platform accessible to overseas issuers.
I am glad that the Hong Kong government is committed to green projects and helping lower their financing costs.
The upcoming launch of the Government Green Bond is expected to stimulate the market, speed up the transition into a low-carbon economy with more high-value-added industries and job opportunities, as well as to promote sustainable development in green finance.
In order to attract more green investors, clear and unambiguous disclosure of environmental information will be required to ensure that green financing projects and related finance products are genuinely aimed at combating climate change or promoting sustainability.
That said, I would suggest the government could raise the standard and credibility of the current Green Finance Certification Scheme with reference to the Climate Bonds Standard (CBS) set by Climate Bond Initiative.
In September last year, during the announcement of the green finance strategic framework, the Securities and Futures Commission (SFC) said green investment opportunities could be opened up by adopting international disclosures standards (e.g., Task Force on Climate-Related Financial Disclosures) as well as strengthening the consistency and compatibility of disclosures of environmental information by listed companies.
The total value of green bonds issued last year reached US$167.3 billion. China was the world’s second-biggest issuer after the United States, with issuances totaling US$30.9 billion.
Hong Kong has good potential in playing a key role in the certification of green bonds. Through Bond Connect, the city could become a major green bond market by bridging mainland and foreign investors. Not only would it boost the issuance of bonds, it could also broaden the investor base.
Last but not least, the government should draw up a long-term plan to turn Hong Kong into an international center of green finance, and ensure that we have an ample pool of professionals who are adept at assessing environmental and climatic issues.
This article appeared in the Hong Kong Economic Journal on March 8
Translation by John Chui
[Chinese version 中文版]
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