Mostafa Monira Firdouse, Green Finance Advisor of Friends of the Earth (HK)

The Hong Kong Monetary Authority (HKMA) has recently published its White Paper on Green and Sustainable Banking, as well as a circular to share a range of practices adopted by major authorized institutions (AIs) for managing climate risks (7 July Circular). These form part of a series of initiatives by the HKMA that are intended to help shape a greener and more climate-resilient banking system.

At the same time, the Hong Kong Stock Exchange (HKEX) announced plans to launch the HKEX Sustainable and Green Exchange (STAGE) on June 18th. This platform intended to act as a central hub for data and information on sustainable and green finance in Asia.

In my view, these remarkable initiatives are timely and hope it will be implemented successfully.  

‘The white paper’ – how much it can generate greener and sustainable financing:

At the beginning, HKMA conducted a survey in April 2019 to understand AIs’ (Authorized Institution’s) awareness of and progress in developing green and sustainable banking (please refer to Part III of this paper for more details of the survey). On a question about the potential benefit of developing green and sustainable banking business, “corporate image and reputation benefits” was considered by the most AIs (Authorized Institution’s) as significant (68%), followed by “more business opportunities and new income sources” (66%), “meeting customers’ demand” (62%) and “portfolio diversification” (52%).

Honestly, I am impressed to see the level of awareness, I believe Mangkhut taught us a lot.

In the white paper, the HKMA also provides a summary of its observations; including a range of practices adopted by financial institutions, set out under each of the relevant guiding principles. AIs are recommended to consider these practices when developing their climate risk management framework. They should take into account the nature, scale and complexity of their businesses, and ensure that their risk management framework is proportionate and fit for purpose.

AIs are also reminded to note the importance of being agile when managing climate risks, which are products of multiple interacting forces (for example, natural, technological and societal) and are therefore inherently uncertain and prone to changes. They should keep abreast of the latest standards on climate risk management and make adjustments to their approach based on actual developments.

Specially, I am looking for implementation of nine guiding principles on governance, strategy, risk management and disclosure.

What I am missing;

Divestment: Climate change needs immediate action on divestment in certain sector, however, the divestment plan is not in white paper.

Sector Selection: No indication on sector categorization for climate focus investment.

Collaboration: As we know ESG investment is already pretty established in Hong Kong. HKEX listed companies are mandatory ESG scrutiny. Besides. HKEX’s STAGE, aiming to act as a central hub for data and information on sustainable and green finance in Asia. So, are the AI’s collaborating with HKEX for data and information?

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