Development of green and sustainable finance in Hong Kong
Development of green and sustainable finance in Hong Kong
Mr CHAN Chun-ying noted that the green bonds issued under the GGB Programme were mainly denominated in US dollars, and asked whether the Administration had any plan to issue Renminbi (“RMB”)-denominated GGBs which would help strengthen Hong Kong’s status as the global hub for offshore RMB business and if the Administration would consider liaising with the Mainland authorities with a view to simplifying the procedures for Mainland companies to issue green bonds in Hong Kong. He further enquired about the present position of the Green and Sustainable Finance Grant Scheme (“GSFGS”) which had been established to subsidize eligible bond issuers and loan borrowers on their expenses on bond issuances and external review services.
USFST responded that green bonds issued in Hong Kong by both public bodies and private corporations in recent years had been denominated in various currencies in addition to US dollars, such as EURO and RMB. With the increase in the borrowing ceiling of the GGB Programme, the Administration would have more flexibility in piloting the issuances of GGBs involving a wider variety of currency denomination and tenor, as well as for funding a wider scope of green projects; thereby promoting further diversification of the local green bond market. As regards GSFGS, USFST advised that the Scheme was launched in May 2021, and was welcomed by the market. Over 10 applications had been received so far with some of them already approved. On the regulatory requirements for bond issuers from the Mainland, Head (Market Development), Hong Kong Monetary Authority (“H(MD)/HKMA”) said that the Hong Kong Monetary Authority (“HKMA”) had been liaising with the industry and the relevant Mainland authorities to facilitate the bond-issuing process. It was noted that local financial institutions had been getting more familiar with the relevant issuance requirements. HKMA would continue its collaborative efforts with the financial sector in promoting Hong Kong as an attractive bond-issuing platform for Mainland companies.
Carbon market opportunities
Noting that the demand for carbon trading in the local market was limited, Mr CHAN Chun-ying asked whether the Administration would consider co-operating with the Mainland in setting up a cross-boundary carbon trading mechanism, so as to facilitate Hong Kong’s participation in the national carbon trading market as a member city of the Guangdong-Hong Kong-Macao Greater Bay Area (“Greater Bay Area”).
HGSF/HKEX said that China’s first official national emissions trading scheme (“ETS”) embarked in Shanghai in July 2021. As ETS initially involved only the power sector (i.e. a selected group of Mainland carbon emitters with state-assigned carbon emission quotas), the trading volume had been constrained by a lack of other/foreign participants. There were also no options/futures products in the national ETS. While it was difficult for Hong Kong to establish its own compliance carbon market, there were potentials for Hong Kong to develop into a voluntary carbon trading centre for the region and the world.
USFST and HGSF/HKEX advised that the Steering Group had set up a Carbon Market Work Stream (“CMWS”), co-chaired by SFC and HKEX, to assess the feasibility of developing Hong Kong as a regional carbon trading centre while strengthening collaboration in the Greater Bay Area and exploring other opportunities presented by both the compliance carbon market and the voluntary carbon market in China and overseas. In this regard, HKEX had recently signed a memorandum of understanding with the Guangzhou Futures Exchange for exploring strategic cooperation in developing carbon finance products in both onshore and offshore carbon markets. CMWS had also been studying the recommendations put forward by the Taskforce on Scaling the Voluntary Carbon Markets on developing a high-integrity regime for voluntary carbon markets. It was CMWS’ target to complete its feasibility study by the end of 2021.