The Hong Kong government’s Green and Sustainable Finance Cross-Agency Steering Group announced on Thursday five short-term action plans to cement Hong Kong’s status as an international green finance center.

One plan requires all financial institutions like banks, asset managers, insurance companies and pension trustees have to make mandatory climate-related disclosures aligned with the Task Force on Climate-Related Financial Disclosures recommendations no later than 2025.

As the ESG reporting standard on the Chinese mainland is different from international standards, Hong Kong’s capital market can help by linking up overseas capital and capital originated in the Guangdong-Hong Kong-Macao Greater Bay Area 

Eddie Yue Wai-man, 

Hong Kong Monetary Authority chief executive

Hong Kong will also adopt the Common Ground Taxonomy to classify which economic activities are considered environmentally sustainable.

The city’s financial regulators will support a new Sustainability Standards Board for developing and maintaining a global and uniform set of sustainability reporting standards.

Hong Kong’s financial regulators will invite financial institutions in the city to conduct climate-focused scenario analyses under different climate pathways so that financial institutions can embed climate considerations into their business processes.

Last but not the least, this steering group will establish a platform to coordinate cross-sectoral capacity building, thought leadership, and data exchange.

“Hong Kong’s plan will also have a major impact globally, the extremely large footprint and international significance of the city’s HK$45.7 trillion ($5.89 trillion) capital markets means that they will play a critical role in the overall effort to reach net-zero goals,” said Ashley Alder, co-chair of the Steering Group and CEO of the Securities and Futures Commission.

Another co-chair of the Steering Group, Hong Kong Monetary Authority Chief Executive Eddie Yue Wai-man, said, “HKMA has already incorporated environmental, social and governance standards in making investments for the Exchange Fund since 2015 through adopting ESG indices and ESG filters. If the long-term risk-adjusted returns of ESG and non-ESG investments are the same, the HKMA will choose ESG investments as priority.”

In the Exchange Fund portfolio, the position of ESG bond investments has swelled 200 percent from a year ago, while the HKMA also invested in renewable energy projects in its private investment portfolios.

Yue also said Hong Kong’s financial market can bridge the green financing needs of the mainland companies, whereas the central government pledges to achieve the goal of carbon-neutral by 2060.

“As the ESG reporting standard on the Chinese mainland is different from international standards, Hong Kong’s capital market can help by linking up overseas capital and capital originated in the Guangdong-Hong Kong-Macao Greater Bay Area,” Yue added.

In the Policy Address delivered in late November, Hong Kong Chief Executive Carrie Lam Cheng Yuet-ngor pledged that the government will achieve carbon neutrality before 2050, so that there will be enormous need to develop green finance to boost investments conducive to reducing carbon emissions, and build a low-carbon economy which is more resilient to climate change.

The government will update the “Hong Kong’s Climate Action Plan” in the middle of next year to set out more proactive strategies and measures to reduce carbon emissions.

Co-chaired by the HKMA and SFC, the Steering Group was established in May and currently also comprises members of the Environment Bureau, Financial Services and the Treasury, Hong Kong Exchanges and Clearing, Insurance Authority, and the Mandatory Provident Schemes Authority.