On 15 July 2021, Hong Kong's Green and Sustainable Finance Cross-Agency Steering Group (Steering Group), representing a critical mass of Hong Kong's financial regulatory bodies, announced next steps to advance green and sustainable finance in the Special Administrative Region (the Announcement). According to the Announcement, the regulators will prioritize:

  • climate-related disclosures;
  • carbon market opportunities; and
  • a new cross-sector platform to help the financial industry manage climate change-related risks and opportunities.

In this Blog Post, we highlight key aspects of the Announcement and points for market participants to consider as Hong Kong moves toward a more sustainable future.

Background

The Announcement is the latest from the Steering Group, which was established in May 2020 and includes the Hong Kong Monetary Authority (HKMA), Securities and Futures Commission (SFC), Environment Bureau, Financial Services and the Treasury Bureau, Hong Kong Exchanges and Clearing Limited (HKEX), Insurance Authority the Mandatory Provident Fund Schemes Authority.

The Steering Group set out its initial, comprehensive "Strategic Plan to Strengthen Hong Kong's Financial Ecosystem to Support a Greener and More Sustainable Future" (Strategic Plan) in December 2020. The Strategic Plan sets out six long-term focus areas, including promoting the flow of climate-related information in financial markets and directing capital toward green and sustainable causes, in addition to five near-term action points. For more detail and analysis of the Strategic Plan, please see our Legal Update at MayerBrown.com.

The Announcement

The Announcement effectively outlines practical steps the Steering Group is taking to implement the Strategic Plan by highlighting three near-term priority areas of focus:

  • Climate-related disclosures and sustainability reporting: The Steering Group reiterates their support for the International Financial Reporting Standards (IFRS) Foundation's proposal to establish a new Sustainability Standards Board for developing and maintaining a global, uniform sustainability reporting standard. In the Announcement, the SFC and HKEX commit to collaborate with the Financial Reporting Council and the Hong Kong Institute of Certified Public Accountants to develop a roadmap to evaluate and potentially adopt the forthcoming standard.
  • Carbon market opportunities: The Steering Group has set up a Carbon Market Workstream (CMWS) co-chaired by the SFC and HKEX to assess the feasibility of developing Hong Kong as a regional carbon trading centre. The CMWS will actively explore opportunities presented by both the cap-and-trade and voluntary carbon markets in China and overseas.
  • Centre for Green and Sustainable Finance (the Centre): The Steering Group has launched the Centre to help the financial industry manage climate change-related risks and opportunities. The Centre is a cross-sector platform comprising financial regulators, government agencies, industry stakeholders and academia, and will initially focus on capacity building, thought leadership and policy development.

  • The Future

    The Announcement represents the next set of concrete steps that local regulators are taking to make Hong Kong a world centre for green and sustainable finance. Certain aspects of this journey, however, remain uncertain. Market participants should monitor developments in this space and consider the following:

    1. Climate-related disclosures and sustainability reporting: What will the IFRS Foundation's sustainability reporting standard ultimately look like, and how will those requirements dovetail with the existing HKEX ESG Reporting Guide?
    2. Carbon market opportunities: How would a regional Hong Kong carbon market interface with China's existing emissions trading scheme?
    3. The Centre: How will the Centre promote capacity building in Hong Kong - will this new initiative rely on existing capacity building resources like the HKEX STAGE platform, or might regulators take note of the capacity building efforts of Singapore's Green Finance Industry Task Force and develop sustainability workshops tailored for Hong Kong's financial industry?

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