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Extend CGT to ESG funds – HKGFA

Non-profit body wants to see the common ground taxonomy more commonly applied to ESG funds.
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The Hong Kong Green Finance Association (HKGFA) has said that the common ground taxonomy (CGT) could be applied more readily to ESG funds as part of efforts to boost sustainable investment in the Greater Bay Area (GBA).

With the rising popularity of ESG funds, it is more important than ever for investors to know what makes a fund sustainable and to understand their ESG objectives, Chaoni Huang, vice president and secretary general at the HKGFA, said at a press briefing.

According to the Hong Kong Securities and Futures Commission (SFC), there are 121 SFC authorised ESG funds with a total AUM of $142.7bn.

This represents a year-on-year increase of 2.7 times in terms of number and 1.9 times in total AUM, the SFC noted.

“The origin of CGT is with the green bond and green loan market,” Huang said. “So obviously, its natural function is based in the debt market space.”

“What we are trying to promote or raise awareness of in the market is other areas. Take as an example, green funds: those in renewable energy, electric vehicles and so on.”

The CGT is a joint initiative by the EU and China, which assesses the taxonomies for sustainable investments in both jurisdictions, identifying the commonalities and differences in their respective approaches and outcomes.

The People’s Bank of China and the European Commission published their first report in November 2021 and a second in June this year.

The updated report includes 72 climate mitigation activities that are recognised by both the EU Sustainable Finance Taxonomy and China’s Greed Bond Endorsed Project Catalogue.

Despite much fanfare, the CGT has so far not been widely adopted. There have been four international bond issuances aligned with the CGT. They are by China Construction Bank’s Macau Branch, China Merchants Bank’s Sydney Branch, Industrial Bank’s Hong Kong Branch and Bank of China’s Frankfurt Branch.

There have been no issuances by foreign entities in the China Panda bond market that have adopted the CGT.

The HKGFA is a non-profit group founded in 2018 comprising both the public and the private sector that aims to promote the use of sustainable finance in Hong Kong.

The HKGFA is due to publish its report on Thursday outlining how to apply the CGT to encourage sustainable investment in the GBA.

This story first appeared on our sister publication, ESG Clarity.

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