【Free online registration is available】GGEF Youth Sustainability Leadership Webinar – From talking the climate actions to walking the talks

It is no doubt that our next generation will suffer the most from the climate change. In order to raise the youth’s awareness for this prominent issue, Global Green Economic Forum (GGEF) and Tsinghua x-lab will hold a online sharing titled as ‘Youth Sustainability Leadership Webinar’ with a theme of ‘From Talking The Climate Actions To Walking The Talks’ on 25/9 (15:00 – 17:30 HKT). Our Board Member, Mr. Anthony Cheung will be one of the guest speakers to explore the green finance sector.

More details and free online registration here!

Aligning with green catalog a way for HKSAR to thrive

Idea Exchange – Johnson Kong, researcher at Our Hong Kong Foundation, and Leonie Kelly-Farley, partner at the Sustainable Finance Initiative

The problem of “greenwashing” — making misleading claims about a product’s environmental impact — has long been discussed in the green bond market. After all, determining whether a bond is “green” is not easy, and there have been attempts internationally to define qualifying criteria for such bonds.

The People’s Bank of China, the National Development and Reform Commission, and the China Securities and Regulatory Commission recently jointly published the consultation draft of the Green Bond Endorsed Project Catalogue (2020), which defines what qualifies as green projects for green bonds. The new catalog contains noteworthy revisions from the 2015 version.

Firstly, clean coals and other coal-related investments have been removed from the eligibility list, which has been praised widely both at home and abroad. For a long time, the main discrepancy between Chinese and international standards for green bonds lay on clean coal, which was previously defined as green on the Chinese mainland. The new catalog thus brings China into closer alignment with international standards.

Significant changes have also been made regarding the depth and scope of the green definition. The 2020 catalog expands the scope of eligible green projects, including hydrogen power, carbon capture and storage, and a new category of green services. Furthermore, it has added various technical details on renewable energy efficiency with more stringent requirements to encourage greener outcomes, such as raising the minimum conversion efficiency standard of solar panels to 17 percent from 15.5 percent.

The new catalog represents the convergence of green bond standards within the Chinese mainland. While dual standards had been applied in the jurisdiction, the 2020 catalog provides a unified standard of green bonds, allowing investors to better assess green projects based on a common standard.

As of 2019, green bonds issued by mainland institutions accounted for 79 percent of Hong Kong’s total issuances. Meanwhile, 81 percent of the green bonds issued in the city were denominated in US dollars. This highlights Hong Kong’s role as a bridge between the Chinese mainland and the international capital market, and the need for the city to align its green bond standard closely with developments on the mainland, including the latest catalog, as well as internationally.

Currently, the Hong Kong Special Administrative Region government follows the standards laid out in the Green Finance Certification Scheme from the Hong Kong Quality Assurance Agency. However, with the development of international standards, especially with the ongoing alignment between the Chinese mainland’s and the EU’s “green taxonomy”, it is time for Hong Kong to consider embracing international standards, and to reflect on the city’s role in standard developments. Other than being merely the taker, Hong Kong should consider bringing its own unique insights, for instance its substantial experience in green buildings, into the international discussion on standard setting.

The 2020 catalog represents a connection between green finance and green economy, as it indicates key areas toward which policymakers hope to steer capital. Taking a look back at Hong Kong, what are the green industries in the city we are supporting with green finance?

According to Climate Bonds Initiative, among the green bonds issued locally in 2019, some 61 percent of the capital raised was used on low-carbon buildings. This reflects that Hong Kong’s green bonds and green industries are highly concentrated within the building sector. In the long run, this will affect the diversity of the local green bond market, making it hard to meet green investors’ demand for sector diversification. 

Fortunately, in this year’s budget the SAR government has allocated HK$200 million ($26 million) to support the development or application of green technologies, which is a positive first step toward diversification. In the policy direction of reindustrialization, the government should be more proactive in promoting the development, as well as diversification, of Hong Kong’s green industries and financial market. 

Apart from green bonds, social, sustainability and transition bonds are also growing in the global market. The Hong Kong government could consider supporting the growth of these products, so as to further diversify the sustainable finance market. By introducing a wider credit spectrum and expanding the use of proceeds, these products will help meet growing investor demand and enhance yield and sector diversification for investors.

The Hong Kong SAR government signed the Green Bond Pledge in 2019, whereby it committed to making capital projects resilient and low-carbon in line with the Paris Agreement, as well as financing low-carbon transition through green bonds. The newly established Green and Sustainable Finance Cross-Agency Steering Group aims, among other goals, to work with fellow regulators on developing a green taxonomy and relevant standards for the market. It should do so in a way that reconciles the city’s own needs for sustainable development and the need to align with standards like the 2020 catalog, such that Hong Kong can thrive as an international, sustainable finance hub. 

This article appeared originally in China Daily on 25 Aug, 2020

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Upcoming Events on Green Finance / 今期綠色金融活動一覽

  1. Consultation: ESG Disclosure Standards for Investment Products

    Organised by: CFA Institute CFA Institute is developing a voluntary, global industry standard to provide greater product transparency and comparability for investors by enabling asset managers to clearly communicate the ESG-related features of their investment products.

    With input from a volunteer working group, CFA Institute has developed a consultation paper that seeks feedback on the proposed scope, structure, and design. 

    Any individual, group, or organization is welcome to submit their comments. Comments should be provided using the response form provided and must be submitted to standards@cfainstitute.org by 19th October 2020.

    Comments will be posted and will help shape an exposure draft, an initial version of the standard, which CFA Institute plans to issue in May 2021.

  2. Webinar: Bloomberg Proprietary ESG Scores

    Organised by: Bloomberg
    Date & Time: TBC (Late September)

    Bloomberg recently launched proprietary ESG scores. This initial offering includes Environmental and Social (ES) scores for 252 companies in the Oil & Gas sector, and Board Composition scores for more than 4,300 companies across multiple industries.

    Bloomberg are planning webinars in late September for the scores, so stay tuned! Reach out to Karen Ho (kho14@bloomberg.net) and add her on Linkedln to stay on top of Bloomberg’s upcoming ESG webinars.

  3. New Consultation: PRI Consultation on Human Rights Framework (PRI Signatories only)

    Organised by: PRI

    Building on international human rights standards, the PRI is setting out expectations of signatories in a new paper. We propose a six step framework to implement respect for human rights into investment activities.

    At this time we are seeking feedback from PRI signatories on this paper. The aim is also to understand common challenges faced by the investment industry and need for further guidance to implement respect for human rights.

    The responses to this consultation will inform the development of PRI’s work programme on the topic over the next 3-5 years.

    We are running two webinars on Tuesday 8 September (see below) to present the paper and take questions from participants.

    Deadline for feedback is 18th September, for further details on the survey and to download the paper please click here.

  4. Consultation: Draft GRI Sector Standard: Oil and Gas

    Organised by: Global Reporting Initiative (GRI)

    The public consultation period for the draft Sector Standard: Oil and Gas is now open until 6th October

    This is the first draft Sector Standard to be released for public exposure and a unique opportunity for stakeholders to provide input on the value, clarity, and feasibility of the proposed concept for the Sector Standards, as well as the completeness and relevance of the oil and gas content. Further details and provide your feedback here.

  5. Webinar: MSCI and PRI co-host: Understanding the ESG Risks in the Palm Oil Sector and the Role of Stewardship in Addressing Them

    Organised by: PRI & MSCI
    Date & Time: 29th September 4 – 5pm HKT

    Palm oil is a widely used vegetable oil, benefiting from high yields and versatility, and low costs. These advantages have led to growing demand for the commodity and increased production in South East Asia, particularly Indonesia and Malaysia where over 85% is produced. While the production of palm oil plantations has contributed significantly to economic development, it has also increasingly been linked to significant negative social and environmental impacts including widespread deforestation, greenhouse gas emissions, and labour rights abuses.

    Join MSCI and the Principles for Responsible Investment to learn more about these ESG risks for investors with exposure to the palm oil sector. The webinar will also explore how investors can manage these risks, particularly the role of collaborative investor engagement with companies in the sector, what investors are asking companies and any trends investors are seeing in the sector with regards to the management of ESG risks.

  6. Online Event: The Cooler Earth Sustainability Summit

    Organised by: CIMB
    Date: 8th September to 31st October

    Humanity is at a crossroads. With the unprecedented global climate emergency, we are seeing tipping points with social and environmental upheaval in countries worldwide. The conversation around social inequalities and injustice has risen to the fore. The unprecedented pandemic has put us through a stress test of a world impacted by various environmental and social risks. We can neither live in denial nor ignore the need for urgent action. The new normal is all about Recovery, Resilience, and Responsibility. Only sustainable businesses and communities can emerge stronger and better prepared for future challenges.

    Join CIMB and its knowledge partners, World Wide Fund for Nature (WWF), Impacto, and Think City at The Cooler Earth 2020. The Cooler Earth is our mission to convene global citizens, experts and important stakeholders to deliberate on what you can do today as an individual and as a business to shape a more sustainable tomorrow.

  7. Online Event: RI Digital: Japan 2020

    Organised by: Responsible Investor
    Date: 28th – 29th October

    RI Digital : Japan 2020 is a platform for investors with a Japan focus to continue to discuss important issues both in Japan and across the globe. From major themes such as the current status of ESG to specific deep-dive themes such as stewardship, diversity, corporate resilience, and decarbonisation, we deal with pressing issues that need to be considered in order to create a new normal and a path for economic revival.

    This event is free to participate with or without an RI subscription.

  8. Webinar: Roundtable Series on Essential Sustainability Reporting Topics

    Organised by: GRIStarting in September GRI will be organizing a series of virtual roundtables covering the following five essential sustainability reporting topics: Reporting on the SDGs, Waste, Climate Change, Occupational Health & Safety and Water.

    The series of events will help you connect, co-create, and engage with your peers to think about the most current issues in sustainability reporting.

    The virtual roundtables will be organized as 2.5 hours interactive Zoom meetings where reporting examples and case studies will be shared and where reporting organizations will share their experience on the different topics, discussing challenges and solutions.

    Please select topics of your interest and register to one or more webinars using the links below. Spaces are very limited, so for each webinar we can accept max. two participants per organization.

Visit www.foe.org.hk for more news about Friends of the Earth (HK)!

【Online registration is still open!】2019-20 Green Finance Seminar Series – Session 4 / 2019–20 綠色金融研討會系列 之四

With Hong Kong government prioritising green finance as the city’s future financial strategy, professional sustainable finance knowledge and human capital are becoming higher in demand in the market. In light of this trend, Hong Kong Quality Assurance Agency (HKQAA) is going to hold a green finance seminar titled as “Promoting Innovative Green Financing for Belt & Road Initiative” on Sep 25 (2:30 – 5:00pm) to explore our future green finance opportunities. Our Green Finance advisor, Mr. Felix Lam will attend as guest speaker of the event so don’t miss it!

Register NOW!

港府近年積極發展綠色金融,以追上全球可持續金融趨勢。為探討綠色金融未來發展方向,香港品質保證局將於9月25日(下午2時半至5時)舉行名為 「拓展 『 一帶一路 』 策略機遇推動綠色金融的創新發展 」的綠色金融研討會,邀請商界精英及環境專家討論交流。屆時,本會的綠色金融顧問林學海先生將會以客席講者出席研討會,有興趣的朋友請即報名

ESG Integration and Financial Relevancy

Michele Leung, Green Finance Advisor of Friends of the Earth (HK)

ESG integration, the use of environmental, social and governance (ESG) factors in investment analysis and portfolio management, has gained increasing acceptance in the past few years as investors recognized the profound impact of ESG risks and opportunities on their portfolios. Industry studies have showed ESG investing does provide better risk adjusted returns. Particularly for Emerging and Asian markets, outperformance is much more consistent and significant than what we observed in developed market. One study also showed excluding low ESG-ranked stocks could have aided the risk and return characteristics of a sample of China-focused active funds over a 5 ½ years period.*

ESG is also expected to have some downside protection nature. The COVID-19 pandemic provided the first real test of this hypothesis. Companies with strong ESG characteristics suffered smaller drawdowns in relative terms. Importantly, attribution analysis showed that a large part of this relative outperformance came from ESG and was not merely a proxy for other defensive factors, such as quality and low volatility. It explains why we are seeing more investors interests in ESG investments because ESG does provide resilience during the pandemic, as ESG investing helped to mitigated downsides.

All these studies reinforced the message that ESG gradually becomes a standalone factor, not only for investors looking at integration or regulatory compliance, but also in terms of financial outcomes, such as returns and risk.

In terms of ESG integration, there are numerous approaches for integrating ESG into portfolio construction—whether active or passive strategies—in equities or fixed income. Here are some common approaches.

  • Exclude Business Activities: some investors may want to exclude controversial activities that are not aligned with their values, like tobacco, alcohol or controversial weapons, also known as negative screening
  • Best-in-Class: some investors may want to focus on the highest rated ESG performers in each sector
  • Impact Investing: some investors may want to focus on positive impacts on the society and environment, aligning to the U.N. Sustainable Development Goals

Essentially there is more than one way to integrate ESG into investment process. Hence, a well-defined investment objective would be an important first step for any ESG Integration.

*Source: MSCI Blog: Would Integrating ESG in Chinese Equities Have Worked? https://www.msci.com/www/blog-posts/would-integrating-esg-in/01970806830

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