Proposed resolution under the Loans Ordinance
MR CHAN CHUN-YING (in Cantonese):
At first, President, I did not intend to speak today. However, I wish to make some clarifications here as I have heard some misleading remarks made by Members before and during the debate on the adjournment motion just now.
First of all, I must declare that I am a consultant to a commercial bank. Yet, I have no pecuniary interest in the issuance of bonds as the issuance will be conducted by the investment banks concerned.
President, regarding the issuance of green bonds in Hong Kong, the issuers may actually use the proceeds thus raised to fund projects providing environmental benefits (“green projects”). Besides, the issuance of bonds also helps drive peripheral sectors (such as finance, accounting, legal and certification industries), thereby creating employment opportunities for Hong Kong. In the long run, with an increase in the number of green bonds issued, Hong Kong will be able to set up a “green bond index” and then establish itself as a green bond issuance centre in Asia, so as to further consolidate its position as an international financial centre.
We have to understand in the first place why the Government launches the Government Green Bond Programme (“the Programme”) for borrowing sums up to HK$100 billion. Actually, what many Members said just now was right that the Government is utterly capable of undertaking the entire amount of capital expenditure incurred by the green projects concerned and needs not issue any bonds. Therefore, it is possible that the Government does so with a view to creating a more vibrant green bond market and setting benchmark interest rates for such bonds. Given that the international community also wants to promote environmental protection, bonds which meet the standards for green bonds can enjoy preferential interest rates and even tax concessions. This way, issuers are attracted to invest in green projects, thus forming a benign cycle which will encourage more green investments. I am so pleased to hear the example of government iBonds cited by Dr Fernando CHEUNG just now to illustrate the fact that in some cases, the Government issues bonds purely for the common good.
The breadth and depth of the market are what really matters as far as the bond market is concerned. When the market has adequate breadth, depth and elasticity with a larger number of participants and high market turnover, the liquidity of the bonds held by investors will be higher, who will have stronger desire to invest in the market. This will lead to more active trading in the market at more competitive prices. Conversely, it will be difficult for the Government to take the lead in boosting the development of the green bond market if it is under too many constraints, including the amount of bonds and the time for the issuance, resulting in discouraging investors from investing in the bond market.
I believe that the majority of members of the Subcommittee on Proposed Resolution under Section 3(1) of the Loans Ordinance (Cap. 61) (“the Subcommittee”) were very concerned about and did support the sustainable development of the green bond market. However, some Members proposed amendments today out of concern that the Government will issue bonds at high interest rates. The truth is, however, such bond issuance must proceed according to the tendering procedure, while the denomination, tenor and interest rate are set with reference to the prevailing condition of the bond market. The issuance just cannot proceed should any of these fail to meet the international standards of green bonds.
The Members who proposed amendments suggest that a cap should be imposed on the highest cumulative amount, I once submitted at the meeting of the Subcommittee that under the same concept, the Government had launched the SME Financing Guarantee Scheme offering a total loan guarantee commitment of $100 billion in the aftermath of the financial tsunami. That is to say, if the SMEs concerned make repayments to the Government on time or in advance, the Government can recycle the repaid amount to provide loans to other SMEs in need. And so, the objective consequence of imposing restrictions on interest rate and size will be that the Government will not have any room to made decisions according to the prevailing market conditions.
A number of Members have mentioned in their speeches the issue of land sale. If the same logic is applied to land sale transactions in Hong Kong, are we going to legislate to set a minimum amount (e.g. $5,000) and a maximum amount (e.g. $40,000) for land sale in accordance with the principles of not selling land at minimal prices and not adopting the “high land price policy”? Has every one of us thought about the fact that the actual conditions of different pieces of land may vary greatly and thus their prices should be determined by the market instead of being pre-determined. Hence, we should come up with a certain amount as the reserve price by taking account of the actual situation when selling a piece of land.
President, the momentum in the development of green finance in Hong Kong has been quite good and the pace of development of local green bond market has quicken since this year. As compared with the issuance size of US$2.3 billion in 2017, the total amount of issuance for the first half of this year has already reached US$6.8 billion, tripling that of the entire last year. Besides, issuers tend to be more diversified, ranging from local and mainland enterprises to international organizations. Among the issuers, major commercial banks and policy banks have been replaced by leading enterprises. In other words, Hong Kong has a total issuance amount equivalent to HK$53 billion within six months. It is expected that the total issuance amount for the whole year may exceed HK$100 billion. This tells us the fact that the issuance size of HK$100 billion (may be issued by phases) by the Government will not account for a big proportion in the current green bond market. And I believe that the “advertisement effect” mentioned by Mr CHAN Chi-chuen just now is a closer reflection of the actual circumstances.
Generally speaking, I understand that the purpose of the amendments proposed by some Members to impose restrictions on the time, size and interest rate in respect of the Government’s investments in green projects is that they opine that this Council is responsible for monitoring the Government. I agree with them in this regard. Yet, once their amendments are passed, the actual effect will be restraining market operations instead of monitoring the Government. And so, Members proposed such amendments apparently because they are not quite familiar with the way the capital market operates. However, this may only result in doing bad things with good intentions. Personally, I see more eye to eye with Mr Holden CHOW regarding the point he has made in his speech just now, that is, given the ever-changing standards of the international green bond certification, we ought to give the Government certain degree of flexibility. On the other hand, however, I urge the Government to make more relevant information available to the public when implementing the Programme.
President, although the development of local green bond market begins to bear fruit, the authorities still need to make extra efforts in respect of policies, regulation, investment and financing as well as product innovation in order to provide a better host market environment for the issuance and trading of local green finance products. For example, issuers should be required to follow strictly international mainstream standards for green bond issuance to meet the expectations and demands of international investors as far as possible in a bid to enhance Hong Kong’s ability in attracting international capital. Actually, we, as Members of this Council who wish to promote green investment, should make more effective and feasible proposals to the SAR Government while pressing it to improve the relevant arrangements (e.g. improving the green financial system framework) under the green system as soon as possible, thereby accelerating green investment development. To develop green finance, the Government needs to set out clear green standards. At present, some 20 countries and regions have rolled out their green finance development roadmaps. In the future, we should consider establishing a green fund labelling scheme on top of the Green Finance Certification Scheme with a view to enhancing the transparency of the green standards system.
Furthermore, we should also urge the Government to expedite the refinement of local disclosure system since a sound system for disclosure of environmental information by enterprises is conducive to reasonable pricing, which will help enhance investors’ confidence in green financial products. Last year, the Task Force on Climate-related Financial Disclosures under the Financial Stability Board of the G20 Finance Ministers formulated a set of feasible standards for the disclosure of environmental information by enterprises. At present, countries such as the United Kingdom, France, Canada and Australia have successively implemented mandatory disclosures of information. Therefore, we should urge Hong Kong’s regulators to expeditiously update the rules for disclosure of environmental, social and governance (“ESG”) information by publicly listed enterprises and enhance the consistency and comparability of ESG information disclosures to spur the market demand for green investment.
President, I support the proposed resolution of the Administration and oppose all the amendments. I so submit.