Hong Kong burnishes role as Asia’s green financial hub

[HONG KONG] Hong Kong is burnishing its credentials as Asia’s pre-eminent green financial hub, having arranged the issuance of over a third of Asia’s green finance in bonds and loans, said the head of the city’s de facto central bank.

Eddie Yue, chief executive of the Hong Kong Monetary Authority (HKMA), touted the growth in its issuance of green and sustainable debt, which grew from just US$4 billion in 2020 to more than US$80 billion in 2022.

He was speaking at the inaugural Climate Business Forum: Asia-Pacific on Tuesday (Feb 27), an event that is part of the ongoing Hong Kong Green Week organised by the HKMA.

Speakers at the conference said there was ample room for advancement in this area, where the region has been lagging Europe and America.

Anna Ng, regional head of operations of the Washington-based International Finance Corporation, told the audience that “financing remains very critical and challenging, particularly for small and medium-sized enterprises that lack resources”.

Globally, the green transition is expected to be back on track after a Covid-induced slump, reaching 820 billion euros (S$1.2 trillion) in 2024.

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This is despite it flattening in 2023, with slightly under 800 billion euros in sustainable bond issuance, according to data from Credit Agricole CIB ESG Fixed Income Research.

Hong Kong’s green debt was mostly in the form of green bonds and sustainability-linked loans, according to ANZ.

Yue acknowledged both the vulnerability of the Asia-Pacific region to climate impacts and its contribution to the worsening problem.

He cited figures by the United Nations Development Programme, which showed that the region has suffered, on average, six natural disasters a year over the last 30 years.

This is about twice the number in developing countries of Latin America and the Caribbean, and about thrice as many as in Sub-Saharan Africa. At the same time, he noted that the region is producing more than half of the world’s carbon dioxide emissions.

“For the region as a whole, we need to reduce emissions, adapt to climate change, build resilience, and embrace innovation,” he said.

“As an international financial centre, and also the gateway linking up mainland China and the rest of the world, and also being Asia’s sustainable finance hub, (Hong Kong) can do a lot more in climate finance.” 

In green finance, he highlighted these initiatives: a government-led green and sustainable finance cross-agency steering group set up in 2020 to coordinate efforts across the financial sector; a three-year green and sustainable finance grant scheme launched in 2021 to cover expenses for bond issuers and loan borrowers in obtaining green financing; and an international voluntary carbon market, launched in 2022 by the Hong Kong Stock Exchange. 

Observers said the most impactful was likely to be the forthcoming green taxonomy, a voluntary green classification framework to help companies identify and classify what is considered green activities. 

The green classification framework will need to satisfy both the needs of Hong Kong and mainland-based companies, said Ma Jun, chair and president of the Hong Kong Green Finance Association.