Legislative Councillor’s Column – Spare no efforts in promoting green finance

Translated version of Capital Weekly Legislative Councillor’s Column

Spare no efforts in promoting green finance

In light of environmental pollution, natural resource depletion and the effect of climate change, the Organisation for Economic Co-operation and Development (OECD) estimates that US$6.9 trillion (HK$54 trillion) of annual investment in green, low-carbon and climate-resilient infrastructures will be needed globally. Within this context, it has triggered the birth of green finance. Green finance can be understood as regarding environmental protection as a basic policy by financial institutions, with a focus on the protection of the ecological environment and the governance of environmental pollution in their financial activities, and guided by socio-economic resources to promote the sustainable development of society. Green bonds are financial instruments that have developed vigorously in the field of green finance in recent years. From a funding perspective, it is more cost-advantageous for development finance institutions to raise capital by issuing green bonds collectively and distribute funds to various projects through policy loans than for companies to raise their own project funds through the issuance of project construction bonds or setting up commercial credit. The use of green bonds as financial instruments can reduce input costs effectively, motivate enterprises to accelerate the development of new energy and the application and promotion of energy saving and emission reduction technologies.

Since the issuance of the first Hong Kong green bond by Xinjiang Goldwind Science and Technology in 2015, Link, Mass Transit Railway and Swire Properties have issued green bonds successively. The Chief Executive announced in her 2017 Policy Address that the government would take the lead in arranging the issuance of a green bond in the 2018-2019 financial year. The government would also continue to encourage public organisations to issue green bonds in Hong Kong and promote the establishment of green bond certification schemes that meet international standards by local entities. In early 2018, Hong Kong Quality Assurance Agency announced the launch of “Green Finance Certification Scheme” to provide third-party conformity assessments for green finance issuance. The Budget further promulgated that the government would launch a green bond issuance programme with a borrowing ceiling of HK$100 billion. The government would also set up a Green Bond Grant Scheme to subsidise the cost incurred by qualified green bond issuers in using the Certification Scheme. With a view to encouraging more mainland investors to participate in the Hong Kong bond market, the government should facilitate the inclusion of the green bonds issued in Hong Kong in the scope of eligible securities for the southbound trading of “Bond Connect” which will be implemented in future. Besides, the government should actively consider the practice of other large-scale bond markets and launch a “Green Bond Index”. With the vigorous promotion of the government, we hope that there will be a new development in the green finance area in Hong Kong, and at the same time the competitiveness of the Hong Kong bond market will be enhanced.