Climate disclosures: Hong Kong must up its game on sustainability to elevate its role as green finance hub, experts say
- All players must understand and adhere to the latest requirements issued by the ISSB this week, said speakers at the Post’s Redefining Hong Kong event
- ‘We will up our game to meet the global demand and requirements,’ says undersecretary for financial services and the treasury
Hong Kong needs robust regulations and standards around climate and sustainability-related disclosures to take its role as a hub for green finance to the next level, speakers from the government, the city’s stock exchange operator and companies including HSBC and EY said during a conference on Thursday.
Hong Kong is already an important financing centre for the global transition to a low-carbon economy, but all relevant players in the city must understand and adhere to the latest disclosure requirements to further cement Hong Kong’s hub status, said speakers at Redefining Hong Kong, organised by the South China Morning Post.
“We need to make sure that we have the robust regulations, the robust requirements, for good disclosure,” said Jonathan Drew, head of global banking sustainability for Asia-Pacific at HSBC. “[This] is a challenge in making sure we get our fair share [of the green finance market].”
Green and sustainable debt issued in Hong Kong, including both bonds and loans, increased by more than 40 per cent year on year in 2022 to US$80.5 billion. The city accounted for a third of such debt issued across Asia in that period, Joseph Chan, undersecretary for financial services and the treasury, said during Thursday’s conference.
“We will consider alignment of our local requirements with this global baseline [ISSB’s standard] in a proportionate manner or approach, so that we can ensure that the financial institutions here in Hong Kong will be able to effectively intermediate capital, and also price sustainability-related risk,” Chan said.
“We will up our game to meet the global demand and requirements as well.”
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The ISSB was set up by IFRS Foundation, an international financial reporting standards body, during the COP26 global climate summit in Glasgow in 2021 to consolidate various reporting standards.
Availability of data to meet the reporting requirements is a key challenge, as well as an opportunity, for companies, said Ee Sin Tan, EY’s climate change and sustainability services partner for Hong Kong and Macau.
“Data is a key challenge because people don’t really understand the scope of that data.” Only with comprehensive data will companies be able to automate their analyses and get insight from that data, Tan said.
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Companies will need sustainability professionals to help with that process, said Mark Harper, group head of sustainability at John Swire & Sons (HK).
“There’s an opportunity for businesses to invest in the long-term training and development of those personnel in order to … attract talent to the organisation, but also as a means of preparing the business for the challenges ahead,” Harper said.
Hong Kong has a role to play in helping Asia-Pacific companies understand low-carbon transition plans, said HSBC’s Drew.
“If we don’t do that, we’re at risk of seeing this potential bifurcation of global financial markets,” he said. “We find that money in the developed markets isn’t finding its way into Asia, through Hong Kong, because we haven’t done our job communicating what the transition plan is here, and why that capital could be so productive and useful.”
Cultural shifts within companies will be crucial to driving sustainability in the markets, said Kelly Lee, senior vice-president in the policy and secretariat services unit of the listing division of Hong Kong Exchanges and Clearing, the city’s bourse operator.
“With all these enhanced regulations, listed companies … need to really focus on their sustainability plan and go through the disclosures,” Lee said. “They are also exerting their influence on all their counterparts along the business chain and supply chain. This will definitely have an impact on smaller companies, and that hopefully will help the whole market progress together towards this transition.”
However, adhering to disclosure requirements remains a challenge for smaller companies and SMEs, given the economic environment, said Bella Chhoa Peck-lim, director of asset management at Sino Land. “Sometimes there is a price tag to sustainable development.
“Ecological development will be a core focus [for China] in the next five years. Hong Kong, being a part of the motherland as well as being an international finance centre, we do have that leverage.”
Companies need objective assessment criteria to understand how they are performing and to gauge their room for improvement, said Donald Choi Wun-hing, executive director and CEO of Chinachem Group.
“This requires collaboration and partnership with all stakeholders [such as] academic research institutes,” he said. “They can give us additional knowledge to show us the way to improve, as well as how to collaborate and partner with players in the industry.”
