HKMA announced plans to introduce three sets of measures to support and promote the green finance development in Hong Kong. HKMA expects to collaborate with the industry and other stakeholders to combat climate change risks and develop green finance at the HKMA Green Finance Forum. The three measures involve green and sustainable banking, responsible investment, and the establishment of the Center of Green Finance (CGF). HKMA Chief Executive Norman TL Chan also spoke about green finance development in Hong Kong at the HKMA Green Finance Forum.
Green and Sustainable Banking. The green and sustainable banking will have three phases. The first phase involves developing a common framework to assess the “Greenness Baseline” of individual banks. HKMA will also collaborate with relevant international bodies to provide technical support to banks in Hong Kong to better understand the green principles and methodology in undertaking the baseline assessment. In the second phase, HKMA will engage the industry and other relevant stakeholders in a consultation on the supervisory expectation or requirement on green and sustainable banking, with a view to set tangible deliverables for promoting the green and sustainable developments of the Hong Kong banking industry. In the final phase, HKMA will implement, monitor, and evaluate the progress of banks.
Responsible Investment. HKMA will adopt a principle that priority can be given to Green and Environmental, Social, and Governance (ESG) investments if the long-term return is comparable to other investments on a risk-adjusted basis. To support Responsible Investment, HKMA has already incorporated ESG factors in its credit risk analysis of bond investment. It will further grow the Exchange Fund’s green bond portfolio, through direct investment in green projects or investment in green bond funds. HKMA will participate in ESG-themed public equities investments through external managers in passive or active mandates targeting ESG benchmark index. In addition, HKMA will accord green accreditation as a predominant factor in investment in the real estate portfolio and will consider an appropriate framework for disclosing information on the Exchange Fund’s Green and ESG investing efforts.
Center for Green Finance (CGF). HKMA will establish the CGF under HKMA Infrastructure Financing Facilitation Office (IFFO), which will serve as a platform for technical support and experience-sharing for the green development of the Hong Kong banking and finance industry. CGF and the International Finance Corporation (IFC) will co-organize the next climate business forum in Hong Kong in early 2020. The forum is IFC’s flagship event to discuss trends and business opportunities on climate change and sustainability.
Keywords: Asia Pacific, Hong Kong, Banking, Sustainable Banking, ESG, Climate Change Risks, Center for Green Finance, HKMA
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