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Published: 11:34, October 06, 2022 | Updated: 18:04, October 06, 2022
HK set to boost green transition, development
By Tim Lui
Published:11:34, October 06, 2022 Updated:18:04, October 06, 2022 By Tim Lui

The extraordinary global economic disruptions and inflationary pressures unleashed by the COVID-19 pandemic have marred many nations in the East and the West, but China holds its own through it all and continues to be a compelling investment theme for global investors enthused by the country’s economic liberalization and long-term growth prospects.

It is therefore more pressing than ever for Hong Kong to make contributions to the country’s future economic growth and fully seize the opportunities presented by the Guangdong-Hong Kong-Macao Greater Bay Area initiative by leveraging on our unique position and competitive edges as an international financial and asset management center with world-class standards and business practice expertise.

Indeed, the GBA — an industrial powerhouse coupled with a vibrant technology sector — is well-positioned to be the driving force in spurring China’s green transitions in both finance and industrial development after the country clearly articulated its goal to achieve carbon neutrality.

As the designated international green finance hub of the GBA, Hong Kong’s financial services sector needs to capitalize on this vast market initiative and leverage on our expertise and experience in channeling global capital to drive sustainable initiatives in the region.

The size of Hong Kong’s well-developed capital markets has provided us a great opportunity to drive greener and more sustainable development by taking a leading role in shaping regulatory policies and standards — both for the region and internationally. After all, increased coordination and the ability to find common ground in standards, rules and regulations are essential to mobilize green capital.

The size of Hong Kong’s well-developed capital markets has provided us a great opportunity to drive greener and more sustainable development by taking a leading role in shaping regulatory policies and standards — both for the region (GBA) and internationally. After all, increased coordination and the ability to find common ground in standards, rules and regulations are essential to mobilize green capital

Regulatory authorities in Hong Kong are now working together to create and detail a strategy for setting credible and consistent standards. In respect of information transparency and consistency, we have been enhancing environmental, social and governance (ESG) disclosure requirements of listed companies with a view to aligning them with the recommendations of the Financial Stability Board’s Task Force on Climate-Related Financial Disclosures.

Hong Kong-listed companies are now required to disclose significant climate-related issues that might impact them and any mitigation actions taken. Furthermore, we are considering to adopt the global baseline standards being prepared by the International Sustainability Standards Board, which are expected to be finalized in late 2022 or early 2023.

To encourage the use of listed companies’ ESG disclosures along the investment chain, the Securities and Futures Commission (SFC) has recently required fund managers to take climate-related risks into consideration in their investment and risk-management processes and make appropriate disclosures.

As a key gateway to the Chinese-mainland market, Hong Kong also has a strategic role to play in adding value to its carbon market, which will move into a phase of expansion. Hong Kong is looking to establish links with the mainland market to facilitate global capital flows into the mainland’s carbon market. In addition, Hong Kong’s internationally reputable green certification services and familiarity with both mainland and international standards enable us to bridge the world with the mainland, which, in turn, will enhance the quality of its carbon markets.

The SFC is working closely with the Hong Kong Exchanges and Clearing 

Ltd (HKEX) on carbon market develo-

pment in Hong Kong. In this regard, HKEX signed a memorandum of understanding with the Guangzhou-based China Emissions Exchange in March to explore the development of a voluntary carbon emission reduction program in the GBA. This will help support the development of a GBA Unified Carbon Market and the internationalization of the country’s carbon market.

Meanwhile, Hong Kong’s traditional strength in financial services has been instrumental in facilitating in-depth integration within the GBA and promoting coordinated regional economic development.

A case in point is the Wealth Management Connect, a milestone in the financial development of the GBA that has been bringing organic growth of the area’s wealth-management market and vast business opportunities to the entire financial industry value chain, encompassing product development, product distribution, asset management and related professional and support services.

Since its launch last year, the Wealth Management Connect has been providing residents in the region a direct and convenient channel for cross-boundary investment in diversified wealth management products distributed by banks in the GBA. Mainland investors may now invest in over 100 SFC-authorized Hong Kong-domiciled funds managed by over 30 asset managers. Participation in both directions has steadily increased since the introduction of the program.

As of the end of July, 24 eligible Hong Kong banks offered Wealth Management Connect services together with their respective mainland partner banks. Over 32,000 individual investors participated in the program, and over 11,800 remittances (including Hong Kong and Macao) had been recorded. Cross-boundary fund remittances totaled over 1.19 billion yuan ($169.7 million).

To further expand the Wealth Management Connect, we are working closely with the Hong Kong Monetary Authority and mainland regulators to explore enhancements such as expanding the scope of eligible investment products, inviting more participating firms and improving distribution arrangements.

Interest in open-ended fund companies (OFCs) — the corporate fund vehicle in Hong Kong — has also increased substantially following the launch of the government’s grant program for OFCs to set up in Hong Kong and in light of their eligibility under the Wealth Management Connect. At the same time, some of the listed real estate investment trusts in Hong Kong are already investing in GBA commercial and logistics properties.

It is abundantly clear that riding on increased interconnectivity with the mainland, Hong Kong’s traditional edge as a leading financial and wealth management center with world class infrastructure and regulatory framework will grow stronger by the day. To this end, by offering our distinctive advantages, Hong Kong is well-placed to support and make valuable contribution to the development of the GBA — an important window for the country to connect with the global markets — and to provide the right ecosystem to facilitate the country’s green transition as we strive for greater integration into the nation’s economy.

The author is the chairman of the Securities and Futures Commission of Hong Kong.

The views do not necessarily reflect those of China Daily.


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