Green Finance Advisor of Friends of the Earth (HK)
U.S. climate change policy is set for a different approach, following the results of the Presidential election. This article aims to take a look at the President-elect Joe Biden’s plan on the climate change policy and some of his climate action goals.
Electric Cars/ Automobile
mentioned he aims to get the US back on track to reach net-zero carbon
emissions by 2050, in line with the Paris-Agreement. He also plans to implement
a federal procurement program for clean vehicles and set a goal for all new
American-built buses to be zero-emissions by 2030. To achieve this, he plans to
endow US$2 trillion into research and development goals, including creating millions
of construction , skilled trade and engineering jobs to build the new
infrastructure while providing pathways for workers of all ages and people from
He aims to
work to increase demands for American-sourced clean vehicles, especially in
fleets, while encouraging consumers and manufacturers to move to electric
vehicles through programs, one of which is the Clean Cars for America proposal
to replace old automobiles.
With a view to improve the
electric vehicle growth, he also aims to accelerate battery research and plans
to procure US$ 400 billion for batteries, electric vehicles and upgrading of
industrial manufacturing processes over the next four years. This
includes creating a new Advanced Research Projects Agency on Climate that
examines on a variety of low-carbon options and technologies. He eagers
to beef up the supply chains for clean industries, invest in national labs and
Biden would return the US
to a leadership role on climate change, re-entering the US in future climate
negotiations to advance the goals of the 2015 Climate Agreement, the global
pact made five years ago among nearly 200 nations to avoid the worst impacts of
climate change. Biden said he will bring the U.S. back into
the Agreement as early as February 2021.
The Agreement is a
non-binding agreement amongst nations to reduce emissions and keep the increase
in global temperatures well below 2 degree Celsius, or a 3.6 degrees
Fahrenheit, compared with preindustrial levels.
Once the U.S returns, the
agreement requires countries to set voluntary targets to reduce domestic
emissions and create stricter goals in coming years. The Paris Agreement
has also implemented a binding requirement that countries are required to accurately
report their progress.
It is apparent that Biden’s environmental plan and goals will be a huge undertaking, but it will set the U.S. on the right path to being environmental.
Green Finance Advisor of Friends of the Earth (HK)
Cambridge Dictionary says greenwashing is designed “to make people believe that your company is doing more to protect the environment than it really is.”
There is a growing concerns on Fund Managers, or Corporations (listed companies or corporate bond issuers, or loan lenders) who did less than what they claimed on addressing environmental (or sustainability) issues as a marketing strategy.
In Hong Kong, regulators see the needs to meet investors’ growing demands for climate risk information and combat greenwashing. SFC has just launched a consultation on proposed requirements on 29 Oct 2020 for fund managers to take climate-related risks into consideration in their investment and risk management processes and make appropriate disclosures. Under the proposals, the Fund Manager Code of Conduct (FMCC) would be amended and the SFC will set out expected baseline requirements and standards to facilitate fund managers’ compliance.
Key Points that you
applies to fund managers which manage collective investment schemes (CISs)
but at the initial stage they would not be mandatory for fund managers
which manage discretionary accounts (in the form of an investment mandate
or a pre-defined model portfolio)
covers four key elements: A) governance, B) investment management, C) risk
management and D) disclosure.
B, and C apply to fund managers which have discretion over investment
management and risk management processes irrespective of whether they are
overall responsible or manage only part of a fund; D applies to fund
managers which are responsible for the overall operation of funds
disclosure levels (Baseline vs Enhanced) – Fund Managers with AUM HKD 4
Billion (USD 516M) or above are “Large Fund Managers”
Fund Managers are expected to adopt a more robust approach and make more
detailed disclosures e.g. Large Fund Managers would be required to make
additional quantitative disclosures of weighted average carbon intensity
(WACI) of Scope 1 & Scope 2 GHG emissions at a fund level. Small Fund Managers
would still be expected to disclose on Entity levels if climate risk is
deemed to be relevant
example requirements: applies to ETF, following TCFD framework, Scenario
close on 15 Jan 2021, proposed transition periods: 9-12 months
FoE (HK) encourage market participants to respond to SFC to voice out your opinion!
Today, Friends of the Earth (HK) (FoE (HK)) and Center for Economic Sustainability and Entrepreneurial Finance, The Hong Kong Polytechnic University (CESEF) jointly organized an online forum on Green Finance titled, “ESG Implementation in Hong Kong”.
Mr. Chan Ho Lim, Joseph, JP, Under Secretary, Financial Services and the Treasury Bureau and Wilfred Yiu, Head of Markets, Hong Kong Exchanges and Clearing Limited delivered keynote speeches and analyzed the latest policy and regulatory system of environment, social and governance (ESG) development in Hong Kong.
“Hong Kong’s status as the Asia’s leading international financial centre has well-positioned Hong Kong to be the ESG finance hub for raising green capital and offering green financial products in the region. We have seen green bonds gaining popularity and market traction in Hong Kong. The cumulative green bonds arranged and issued in Hong Kong amounted to USD26bn by the end of 2019, and the volume in 2019 is 2.5times of that a couple of years ago,” Mr. Joseph Chan said.
During the panel discussion, key financial practitioners examined the opportunities and challenges in promoting ESG.
ESG redefines value and purpose for an equitable and sustainable Future
Mrs Mei Ng, BBS, Chairperson of Friends of the Earth (HK) mentioned in her opening remarks, “ESG integration in policy-making, business decision-making and financial investing is key to catalyze a greener, cleaner, healthier and more equitable Future and Economic Recovery. ESG’s goal should be to redefine value and purpose and to redeem fair play, fair value, fair share, fair say and fair choice. Growth with No Woes, Invest with No Regrets.”
Obstacle to ESG promotion: Lack of awareness and guidelines
To enable the public to gain a deeper understanding of the current development and demands of ESG practitioners, Friends of the Earth (HK) previously commissioned CESEF to carry out focus group interviews. The results were published in today’s forum. The research included questionnaires and interviews with 46 respondents who were key ESG stakeholders with backgrounds from banking, asset management, investment fund, investor relations investor relation executives of Hong Kong listed firms, etc. The report revealed that 46% interviewees cited the lack of understanding of ESG as the main reason for the slow ESG implementation.
The current market is lacking representable and certified ESG references, thus industries have difficulties in measuring how to transform ESG performance into business values. The report also pointed out that 41% interviewees felt that there are insufficient comparable historic data. Without ESG data guidelines, systematic data analysis will hardly happen. In addition, near 40% interviewees were worried that ESG implementation will lead to negative returns for their companies. They were afraid that they will have unsatisfying ESG performance when compared with competitors.
Hong Kong needs to upgrade ESG quality, standards and monitoring
In light of the research, Friends of the Earth (HK) made three recommendations to the Government and regulators: Firstly, strengthen the disclosure of ESG performance from enterprises. Regulatory bodies have to understand the needs of ESG practitioners at different stages, so as to better monitor and enhance ESG disclosure quality. Secondly, to formulate various guidelines and indicators related to ESG performance. At the moment, the market lacks comprehensive guidelines, which makes it hard for the industry to evaluate ESG performance effectively. Thirdly, encourage greater promotion of ESG product choices and regulation. Product development and regulation must work in coordination to boost ESG development in the local market.
Build public confidence in ESG and incubate Green Finance human capital
“Public and stakeholder trust and confidence in ESG is a critical factor. Hong Kong needs to enhance the quality of data integrity and transparency, reporting standard and regulatory monitoring. That is why Friends of the Earth (HK) is promoting green finance education and ESG analyst certification to build public and stakeholder trust and to incubate green finance human capital.” Dr. Jeffrey Hung, Chief Executive Officer of Friends of the Earth (HK) added.