FoE (HK) Green Finance Team

Thrilled to participate in the Earth Forum on 22nd April 2024, the Earth Day, and enjoyed a fruitful panel with the theme “How to manage transition risks and ensure robust climate-related financial disclosure?” The panel was moderated by Mr. Anthony Cheung CESGA, the EFFAS Representative of Asia and joined by the below experts from diverse backgrounds as panellist:

  • Dr. Stan Ho, Chief Representative, SynTao Green Finance International Limited
  • Ms. Christine Kung, Senior Director and Head of International Affairs and Sustainable Finance, SFC
  • Ms. Valerie Kwan, Director, Stewardship & Corporate Engagement, Asia Investor Group on Climate Change
  • Mr. Roy Leung, President, Hong Kong Institute of Certified Public Accountants
  • Ms. Diana Parusheva-Loyery, Managing Director, Head of Public Policy and Sustainable Finance, Asia Securities Industry & Financial Markets Association

In this panel discussion on climate-related financial disclosure and transition risk management, experts explored the challenges and opportunities associated with addressing climate change in the financial sector. Panellists delved into crucial topics such as transparency, taxonomy implementation, investor engagement and also the imperative of the topic of “just transition”.

Below are my summary taken away from the thought-provoking conversation.

  1. Transparency and Climate-Related Financial Disclosure

Panelists unanimously stressed the importance of transparency and climate-related financial disclosure. They emphasised that disclosure forms the bedrock of trust between investors, stakeholders, and the broader public. While acknowledging that disclosure alone may not mitigate all transition risks, it was recognised as a crucial starting point for initiating the transition process. The discussion highlighted the need for consistent standards, accountability, and comparability of data to achieve transparency in climate-related financial disclosures.

2. Implementing Clear Definitions and Taxonomies

Clear definition and taxonomy were identified as essential tools for effective transition risk management. Panelists emphasised the need for unambiguous criteria to determine green, amber, and also the rejected categories. The Singapore’s Asian taxonomy, which employs a traffic light system and specific transition deadlines for industries, served as a notable example. The discussion highlighted that establishing clear timelines and deadlines is critical for the successful implementation of taxonomies and enabling a smooth transition to a sustainable future which should be considered by setter.

3. Going Beyond Reporting: Investor Engagement and Metrics

Panelists mentioned that investors are playing a key role in driving the transition and also emphasised the importance of going beyond the reporting and assessing additional metrics to measure companies’ readiness for the facing the transition. Ambitious target setting, decarbonisation strategies, and capital allocation were identified as key metrics that provide investors with a deeper understanding of a company’s commitment to the transition. The Climate Action 100+ Initiative, which evaluates companies’ compliance with Task Force on Climate-related Financial Disclosures (TCFD) recommendations, was highlighted as a valuable mechanism for investor engagement.

4. Collaboration and Guidance for Effective Transition Risk Management

The panel discussion also emphasised the need for collaboration and engagement among investors, companies, regulators, and governments to effectively manage the transition risks. Participants recognised the role of governments and regulators in providing guidance, setting clear standards, and harmonising policies related to climate-related financial disclosure and transition risk management. However, the collective effort of all other stakeholders is also required for achieving a sustainable and resilient future.

5. Towards  “Just Transition”

One of the hot theme in the market was the concept of “Just Transition.” It has been highlighted that the imperative of ensuring the shift towards a low-carbon economy is fair and equitable for all stakeholders which should include workers and communities affected by the transition. The principles of a just transition, such as job creation, reskilling and upskilling programs, and community engagement, were stressed as vital components in fostering an inclusive and sustainable future. Everyone should take care and prepare to participate.

In conclusion, this panel discussion brightened the multidimensional nature of climate-related financial disclosure and transition risk management. Transparency, clear definitions, and taxonomies were identified as key enablers for effective disclosure and transition planning. Investor engagement, metrics beyond reporting, and collaborative efforts emerged as essential elements in managing transition risks. Moreover, the imperative of the “Just Transition” underscored the need to prioritise fairness, equity, and social considerations throughout the transition process. By embracing these insights and working together, the financial sector can play a leading role in driving the transition to a sustainable and resilient future.