Hong Kong can take the lead to set disclosure example in sustainable financing, bankers say
- Each of Hong Kong’s 2,500 listed companies must put numbers on potential impact from extreme climate events, according to draft rules due for final approval in 2023
- Any fund manager with a portfolio larger than US$1 billion must disclose the emissions data of companies they invest in, starting this month, the SFC says
“The availability and quality of ESG data has been an industry issue, as the current regulatory requirements are fragmented, while the disclosure requirements vary in different markets,” he said, adding that better disclosure standards can help the emerging markets to get more funding to finance their ESG projects.
Sustainable finance refers to the sale of green bonds or other forms of fundraising to promote ESG activities, the fight to avert climate change, reduce pollution and community activities. It is an area that Hong Kong’s government is focusing on, as it tries to develop the city as a regional hub for green financing on its way to carbon neutrality by 2050.
Up to US$56 billion of ESG bonds and loans had been arranged in Hong Kong as of 2021, putting the city at the very top of Asia’s green fundraising efforts, a fact that underscores how Hong Kong can “lead by example,” Financial Secretary Paul Chan Mo-po said during his pre-lunch keynote address at the summit.
Can Hong Kong help cut through the alphabet soup of global ESG rules?
The Asian Infrastructure Investment Bank (AIIB) also has ESG at the top of its agenda as it aims to allocate at least half its annual financing disbursements by 2025 towards projects that tackle climate change.
“A lot of people have put this bank under the microscope in this field, magnified exponentially, so we are very careful [because] our reputation is very important,” said the bank’s chairman and president Jin Liqun. “From day one, we [went] by international best practice.”
The number of country members of Beijing-based AIIB has almost doubled to 105, from 57, seven years into its operations, a growth that Jin credited to its high disclosure standards.
The International Organisation of Securities Commissions (Iosco) – currently chaired by Hong Kong’s securities regulator Ashley Alder – has given its endorsement to prototype climate and general disclosures. That will then be adopted by regulators such as the SFC and Hong Kong Exchanges and Clearing Limited (HKEX), whose chief executive Nicolas Aguzin moderated the panel on sustainable finance.
“Hong Kong’s capital market [involves] international investors, helping it to act as the super connector in raising green bonds or other financial products for the Chinese government and companies,” Zhong said. “Hong Kong can also be involved in the setting of global ESG standards to narrow the gap between the standards of China and the Western world.”
This means the country needs to fill a funding gap of 1.1 trillion yuan each year between 2020 and 2060, in the financing of green innovative technologies across all sectors including electricity, steel, transport and construction, said the report.
The astronomical sum puts many small countries at a disadvantage, as they lack the big capital markets to raise funds, said KKR’s co-chief executive Joseph Bae. Private equity firms and other investment banks can help raise funds in the international markets to support their sustainability financing needs in renewable energy, energy or other projects, he said.