Hong Kong Green Finance Association Launch: Key Takeaways

By Dharisha Mirando 18 October, 2018

What is the HKGFA & how can it aid China's Belt & Road Initiative? CWR's Mirando shares 3 key takeaways from the launch

In June the HK govt announced its HKD100bn green bond programme but green finance is still at a nascent stage in HK
The launch of the govt-backed non-profit HKGFA is an important step to change this and make Hong Kong a green finance hub
Better disclosure is necessary to prevent greenwashing & the green finance strategic framework launched by the SFC is a good start; however, a teething period is to be expected

Hong Kong, as a financial centre, is perfectly poised to channel investments to China and for its Belt and Road Initiative (BRI) to capture more green finance opportunities. The launch of the government-backed non-profit HKGFA is an important step towards making Hong Kong a green finance hub.

HKGFA aims to establish HK as a leading international green finance hub & serve as an important platform for green financing among China & markets along the Belt & Road

As Dr Ma-Jun highlighted: “Green finance has become the major trend in the development of the global financial sector. Hong Kong has the obligation and capability to contribute and promote the development of green finance. Hong Kong Green Finance Association will aim to establish Hong Kong S.A.R. as a leading international green finance hub and serve as an important platform for green financing among China and markets along the Belt & Road”.

The HK govt’s green bond issuance of up to HKD100bn (USD12.82 billion), launched in June, will be key for the development of green finance

As large shortfalls in climate finance already exist, the government can play a key role in supporting this growth, which was confirmed by Hong Kong’s Chief Executive the Hon Mrs Carrie Lam Cheng Yuet-ngor’s statement: “Rest assured, my Government will support the Association and other local professional bodies in their work, including in their collaboration with overseas counterparts in the promotion of green finance.” She also mentioned the Hong Kong government’s green bond programme launched in June of up to HKD100 billion (USD12.82 billion), which will also be key for the development of green finance in the city.

I was able to attend the launch as China Water Risk is a founding member of the HKGFA. Below are three key takeaways from the day’s discussions:

Green finance is still small in Hong Kong

Green Finance is at an early stage of development in Hong Kong; so far this year, USD1 billion of green bonds have been launched by local and international corporates, as well as multilateral development organisations. This amounts to more than all of what was raised last year and signifies enormous space for growth in the green bond market. However, Tim Freshwater, Vice Chair of the HKGFA, stated that Hong Kong accounts for less than 5% of global issuances currently.

Comparatively, according to the Hong Kong Monetary Authority, Mainland China issued green bonds amounting to USD23 billion in 2017, representing 15% of the world’s total. With the launch of the HKGFA, Hong Kong is now in a good position to help meet this growing demand as China alone requires USD1.3 trillion from the private sector to meet the requirements of its 13th Five Year Plan.

Significant opportunities ahead

Government buy-in is evidently available for the Hong Kong green bond market. The next step is for the private sector to take hold of the opportunity that this government support provides.

HK can help direct green finance flows to China from the rest of the world

As noted by Ashley Alder, CEO of the SFC, Hong Kong is in a unique position to be at the leading edge of global developments in green finance as it can help direct green finance flows to the Mainland from the rest of the world, to finance China’s substantial green development ambitions.

China’s BRI is also an enormous opportunity as it will need up to USD6 trillion of investment by 2030, which will require private capital. According to Chaoni Huang, Vice President and Secretary General of HKGFA, and Director of Green and Sustainable Solutions APAC at Natixis, most infrastructure projects along the Belt and Road are currently “brown”. Therefore, Hong Kong can play a key role in directing green finance towards viable projects, as China has envisioned that this initiative will follow a green development path.

Better disclosure necessary for the success of green finance

The green finance strategic framework aims to ensure consistent & comparable disclosure of environ info by listed co’s

Without better disclosure, green washing could be prevalent as green finance instruments can be used as to boost reputations and also to access new sources of funding. China and Europe currently lead the way on regulations ensuring more disclosure, but Ashley Alder asserted that the quality of such disclosure still needs to be improved. The green finance strategic framework launched by the SFC aims to ensure consistent and comparable disclosure of environmental information by listed companies, to ensure the credibility of green product offerings in Hong Kong. However, a teething period may have to be expected.

Overall, Hong Kong is in a unique position to reap the benefits of China’s ambitious green development plans. So far the city has been slow to take up the opportunity; therefore, the launch of the HKGFA is a step in the right direction.

Further Reading

  • Changing Perspectives: Report Launch At Asia Society – With water experts sharing their views at our Asia Society forum, China Water Risk’s Dharisha Mirando & Dawn McGregor recaps and explores how & why we have to start thinking about water differently
  • Tackling Asia’s Water Challenges – Following China Water Risk’s new report highlighting Asia’s water challenges and the Hindu Kush Himalaya region, Cecilia Tortajada from the Lee Kuan Yew School of Public Policy calls for action from the investment community
  • Hindu Kush Himalayas – Why The Third Pole Matters – What is the Hindu-Kush Himalayan (HKH) region and why does this “Third Pole” matter for Asia’s economy? How we can protect the region better? We sat down with Dr David Molden, the Director General of ICIMOD, to find out more
  • Water Rights In China: 4 Years On – 4 years on, what is the status of the water rights trading system in China? Find out in our in-depth interview with Prof. Jia Shaofeng, the Deputy Director of the Center for Water Resources Research at the Chinese Academy of Sciences
  • Financing Green Infrastructure In The GBA: Key Takeaways – The Greater Bay Area accounts for 12% of China’s GDP but climate change means this is at risk. How can green finance help? China Water Risk’s Dharisha Mirando shares key takeaways from the HKUST conference
  • 5 Trends For China Green Finance – CWR ‘s Xu sees positive outlooks from the 2018 Green Finance Conference: from disclosure to OBOR
  • Where Is The E In ESG Disclosure In China? – China is moving to mandatory environmental disclosure with a tentative 2020 deadline, but where are listco’s now? China Water Risk’s Dawn McGregor & SynTao’s Dr. Peiyuan Guo share 8 key takeaways from their newly released joint report, “CHINA PRIORITISES ENVIRONMENT: More Disclosure Needed To Match Rising Risks”
  • Connecting Finance & Water Risk – Natural Capital Coalition’s Mark Gough & Joseph Harris-Confino on their newly launched supplement for the finance sector – see how can this help bankers, investors and insurers alike amidst increasing ESG adoption
  • Key Takeaways From The 5th China SIF Conference – The 5th China Social Investment Forum Annual Conference was just held in Beijing. See Dr Guo Peiyuan of SynTao Green Finance, a co-host of the event, three key takeaways, including the first ESG Chinese equity index
Dharisha Mirando
Author: Dharisha Mirando
Dharisha Mirando hails from the finance industry and joined CWR as she believes that climate and water factors are downplayed by the sector despite being significant investment risks. To tackle this, her ambition is to help build consensus, bridge the gap between finance and science, and engage with investors to incorporate these risks into their due diligence and portfolio management. This could in turn lead to innovative Green Finance instruments becoming more prevalent. She has already made strong headway as the lead author of a recently published report with Manulife Asset Management and the Asia Investor Group on Climate change, which highlights the imminent threats to Asian asset owners' portfolios from climate and water risks. Dharisha has also undertaken a number of speaking engagements on these pressing issues at investor and insurance conferences. Prior to joining CWR, Dharisha worked for a long-only public equities fund. She has also worked in the impact investment space in London and Singapore where she provided technical assistance to social enterprises, helped them raise equity investments, and managed a debt portfolio.
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