To support the city's development as an international green and sustainable financial hub, the Hong Kong Monetary Authority (HKMA) has launched a transition finance initiative to classify activities that can help carbon-intensive companies achieve net-zero emissions. We are preparing the framework.
The HKMA is developing a regional 'green taxonomy' framework to classify economic activities that are considered environmentally friendly or sustainable, and the next step will be to expand the framework to include transitional financing. That's planned, Deputy CEO Darryl Chan Wyman said.
“We plan to start preparing a transition taxonomy this year,” Chan said. “This will be the next stage of our work” to develop a regional green classification framework.
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“The taxonomy will be critical for transition financing so that banks will have a common standard to follow when issuing bonds and loans.”
Transition finance refers to bonds and loans that help companies transform carbon-intensive operations into climate-neutral organizations in line with global green aspirations.
The development of transition finance has been identified as a key initiative in 2024 by the Green and Sustainable Financial Institutions Cross Steering Group, a body established in May 2020 by Hong Kong's financial regulators, including the Securities and Futures Commission and the HKMA. Identified. Other government agencies are also working together to accelerate the growth of green and sustainable finance in Hong Kong.
Tackling transition classification is not easy, says HKMA Deputy CEO Darryl Chan. Photo: Sun Yeung alt=HKMA Deputy CEO Darryl Chan says tackling the transition classification is not easy. Photo: Seungyoung>
Mr Chan said the HKMA will develop the taxonomy as part of its cross-ministerial steering group's efforts to create a market ecosystem to help financial institutions make more transition loans.
“Starting to work on a transition taxonomy is not easy,” he added. “Across the world, transitional taxonomies have been developed to classify anything. [activities] It is considered a transition to a net-zero economy.
“Various places are working on their own transition taxonomies, including ASEAN, the EU, and the European Union. [mainland China]. ”
In January, the Shanghai municipal government announced a transition classification that includes water transportation, ferrous metal smelting and processing, oil refining, chemical raw material manufacturing, automobile manufacturing, and aviation.
In December, the Monetary Authority of Singapore released the Singapore Asia Taxonomy, which defines green and transition activities that contribute to climate change mitigation across eight industries, including energy, real estate, transport, and carbon capture and sequestration.
Last June, a sustainable finance package was added to the EU's classification, containing criteria for economic activities that significantly contribute to the transition to a circular economy.
“We want to learn from what other companies are doing when it comes to migration. [taxonomy] …So that there are no big differences between banks in different jurisdictions,” Chan said.
In May last year, the HKMA held consultations to develop a prototype green classification framework for local market adoption “to classify and label financial products and investments based on environmental sustainability.” It started.
According to the consultation document, the framework will use a common taxonomy for China and the EU as the main reference for sustainable finance initiatives that will be accepted across different jurisdictions.
Mr Chan said the framework identified four areas that could be applied to Hong Kong. These include electricity and generation, transport, water supply, waste management and construction.
“The prototype will be rolled out first to banks as a reference and also to other financial sectors as a starting point” in identifying green economy activities, he said.
As part of the government's Green Week, which starts on February 26, the HKMA will jointly organize the “Climate Business Forum: Asia Pacific” with the International Finance Corporation to promote the development of cities as international green and sustainable financial centers. Mr. Chan said that he would promote this. .
As of February 22, the government has issued a total of $25 billion in green bonds denominated in various currencies and maturities to fund various green projects in the city, Chan said.
Mr Chan said the HKMA plans to launch and hold a climate finance event in Hong Kong with the Dubai Financial Services Authority in the autumn focused on accelerating transitional financial flows between the Middle East and Asia. he added. We hold an event every year with the Dubai government.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative news organization on China and Asia for more than a century. For more stories from SCMP, explore the SCMP app or visit SCMP on Facebook. twitter page. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.
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