Priya Patel
TLDR:
- The Hong Kong Monetary Authority is developing a transition finance framework to support the city as an international green and sustainable finance hub.
- The framework will include a taxonomy for transition financing, focusing on activities that help carbon-intensive firms achieve net-zero emissions.
The Hong Kong Monetary Authority (HKMA) is working on a transition finance framework to determine whether activities can assist carbon-intensive firms in reaching net-zero emissions. This framework is intended to promote Hong Kong as a global green and sustainable finance hub. The HKMA has been creating a local “green taxonomy” framework for classifying environmentally friendly or sustainable economic activities. Deputy CEO Darryl Chan Wai-man announced that the next step will involve expanding the taxonomy to encompass transition financing. Transition finance refers to bonds and loans that aid companies in transforming their carbon-intensive operations into climate-neutral entities aligned with global green goals.
The development of transition finance is a key initiative identified for 2024 by the Green and Sustainable Finance Cross-Agency Steering Group, formed by financial regulators in Hong Kong. This group includes entities like the Securities and Futures Commission and the HKMA, as well as other government bureaus. The HKMA will develop the transition taxonomy as part of the steering group’s efforts to create a market ecosystem for facilitating more transition finance by financial institutions. Chan mentioned that developing a transition taxonomy is a challenging task, and various regions around the world are also working on their own transition taxonomies, including Asean, the EU, and mainland China. The HKMA plans to take cues from these efforts to ensure consistency across different jurisdictions.
In January, the Shanghai municipal government published its own transition taxonomy, and the Monetary Authority of Singapore unveiled the Singapore-Asia taxonomy in December. The HKMA also launched a consultation last May for developing a green classification framework applicable to Hong Kong, with a focus on sectors such as electricity and power generation, transport, water supply and waste management, and construction. The framework will be rolled out for banks first as a reference point for identifying green economic activities.
As part of the government’s Green Week, the HKMA hosted the “Climate Business Forum: Asia-Pacific with the International Finance Corporation” to advance Hong Kong’s status as a global green and sustainable finance centre. The HKMA plans to collaborate with the Dubai Financial Services Authority for a climate finance event in the autumn, with a focus on accelerating transition finance between the Middle East and Asia. The government has issued green bonds amounting to US$25 billion for funding various green projects in Hong Kong.
