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HKEX plans green bond platform

Hong Kong Exchanges and Clearing Limited (HKEX) says it will launch a central hub for data and information on sustainable and green finance investments later this year.

The HKEX Sustainable and Green Exchange (Stage) will promote the visibility, transparency and accessibility of sustainable and green securities across asset classes and product types available in Hong Kong, a HKEX spokesman told FSA.

Initially, Stage will act as a repository of information on sustainability, green and social bonds and ESG-related exchange-traded products listed on HKEX.  Issuers with products that meet international standards or principles and provide post-issuance reports annually can join Stage without the need to pay any fees and to display their products on the platform.

The online repository will be launched as early as later this year, and it will be voluntary for issuers to display their green products, according to the spokesman.

“By encouraging issuers, investors, asset managers, market participants and advisors to play an active role in enhancing the sustainable and green finance ecosystem in Hong Kong and the region, [Stage will reinforce] the sustainability of our own market,” said HKEX head of green and sustainable finance, Grace Hui, in a statement.

HKEX intends to develop the platform further, possibly expanding its coverage to include more asset classes and product types, such as derivative products linked to relevant sustainability or ESG indices.

Partners in the development of the platform include the International Capital Market Association and the World Federation of Exchanges, as well as the Climate Bonds Initiative and the Hong Kong Green Finance Association.

Sustainable and green investment financing, and ESG-themed funds have grown throughout Asia-Pacific in recent years.

Green bond issuance in the region hit record levels in 2019, raising $18.89bn, with mainland China’s green bond market alone accounting for $8.13bn, according to the Hong Kong Information Services Department.

Meanwhile, the cumulative amount of green bonds arranged and issued in Hong Kong had reached $26bn by the end of 2019. The Hong Kong government launched its debut green bond in May last year, raising $1bn with a five-year issue that was distributed in Asia, Europe and the United States.

“Our goal is to help issuers raise awareness of their sustainable and green financial products, [while] also offering investors and asset managers easy access to information for their due diligence, selection and monitoring,” said Hui.

Hong Kong regulatory initiatives

Many Asian countries are already on a path towards promoting and regulating environmentally-friendly investment and finance through promoting green bonds, drafting environment risk management guidelines to asset managers, or providing ESG indices on its stock market.

However, Hong Kong has been the most determined to develop an accountable and transparent ESG regime for investment products sold within its jurisdiction.

Hong Kong’s Securities and Futures Commission (SFC) established a framework for green finance in September 2018, whose action-items included enhancing disclosure by listed companies of environmental information (in particular climate-related disclosure) and conducting a survey of asset managers and asset owners on their sustainable investment practices.

The Hong Kong Stock Exchange responded to the first of these SFC’s initiatives in December 2019 by insisting that listed companies include a statement from the company board setting out its consideration of ESG issues.

As for the second action item, the SFC published a circular in April 2019 to provide guidance to management companies of SFC-authorised funds with an ESG investment focus. It released the results of its survey of asset managers in December 2019, indicating that it planned to develop standards and provide practical guidance on the management of climate change risks in asset management.

The SFC presented a list of ESG-approved funds (there are now 30 of them) that meet its disclosure requirements aimed at countering so-called “greenwashing” – where funds or the companies they invest in make false or unsubstantiated claims about their environmental or social credentials.

To reinforce the official stance, last year the Hong Kong Monetary Authority (the territory’s central bank) announced three measures to support green finance development, including a common framework to assess the “greenness” of banks, giving priority in its exchange fund to green and ESG investments if the long-term return is comparable to other investments on a risk-adjusted basis. It also set up a centre for green finance to serve as a platform for technical support and experience sharing for the green development of the banking and finance industry.

Part of the Mark Allen Group.