The HKMA will set up a Centre for Green Finance under the HKMA Infrastructure Financing Facilitation Office as a capacity building and experience sharing platform for the green development of the local banking and finance industry. (TED ALJIBE / AFP)

The Hong Kong Monetary Authority (HKMA) — the city’s de facto central bank — is to launch three key initiatives to combat risks arising from climate change, and develop green finance to cement the special administrative region’s status as a world green financing hub.

“Climate change must be tackled on a global basis and across different sectors of the economy. How the banking and financial system operates will clearly have an impact on the way in which climate risk is managed or reduced," HKMA Chief Executive Norman Chan Tak-lam said on Tuesday. 

Climate change must be tackled on a global basis and across different sectors of the economy. How the banking and financial system operates will clearly have an impact on the way in which climate risk is managed or reduced

Norman Chan Tak-lam

HKMA chief executive

The first initiative involves a three-phase regulatory approach by developing a common framework to conduct baseline assessments on banks’ progress in green and sustainable businesses.

In the first phase, the HKMA and relevant international bodies will provide technical support to banks in developing an assessment framework in line with international standards when banks conduct green businesses. The assessment framework should be formulated this year.

The authority will consult the industry to set tangible deliverables for promoting the green and sustainable development of the SAR’s banking sector. The third phase will involve continued monitoring and evaluation of banks’ green business progress after the relevant measures are implemented.

The second initiative involves the management of the Exchange Fund. As manager of the Exchange Fund, the HKMA will give priority to green, as well as environmental, social and governance investments if the long-term returns are comparable to those of other investments on a risk-adjusted basis.

The HKMA will set up a Centre for Green Finance (CGF) under the HKMA Infrastructure Financing Facilitation Office as a capacity building and experience sharing platform for the green development of the local banking and finance industry. The CGF will work closely with International Finance Corporation to co-organize the next Climate Business Forum in Hong Kong early next year.

The HKMA also said the investor roadshow for the government’s first sovereign HK$100-billion (US$12.75 billion) green bond issuance kicked off on Tuesday. The Hongkong Shangai Banking Corporation and Credit Agricole is the government's green bond joint global coordinators.

“With Hong Kong amassing abundant fiscal reserves and enjoying a high credit rating, I believe there’ll be a tremendously favorable market response to the government’s green bonds,” Chan said on the sidelines of the HKMA Green Finance Forum.

The forum, organized by the HKMA, brought together more than 120 representatives from banks, multilateral development agencies, professional service providers and green associations, as well as asset managers.

Mary Huen Wai-yee — chairperson of the Hong Kong Association of Banks — said the association welcomed the HKMA’s initiatives. “The green finance committee under the HKAB will liaise with the HKMA’s green finance center on how to formulate the framework for assessing banks’ green and sustainability projects,” she said.

According to a survey conducted by the HKMA last month, 47 Hong Kong banks have acquired green loans of HK$20 billion and green bonds of HK$40 billion. About 60 percent of the respondents said they planned to develop green and sustainable banking businesses.

“The three-phase regulatory approach provides a clear roadmap and a comprehensive strategy to enhance Hong Kong’s position as a leading international green finance hub in Asia,” said HSBC Greater China Chief Executive Helen Wong Pik-kuen.

She revealed that HSBC has so far invested 30 percent of its capital in sustainable investments, and expects US$100 billion in such investments to have been made by 2025.

Gao Yingxin — vice-chairman and chief executive of Bank of China (Hong Kong) — said promoting green finance is one of the important businesses of the Chinese mainland banking group. He expects banks to charge lower interest rates for green loans, while the financial market can provide higher coupon rates for green bond investors.

According to Huen, green financing has huge market potential, with global emerging markets seen to require US$23 trillion in funding for climate projects between 2017 and 2030.

oswald@chinadailyhk.com