CARE2022 Hong Kong Conference

67 • Creating infrastructure and ecosystem – talent and data being the two essential elements to enable the financial industry to go green (see also Chapter 4): i) On talent, apart from increasing local capacity (as noted above),5 attracting overseas talent to Hong Kong was also being pursued. ii) On data, the Green and Sustainable Finance CrossAgency Steering Group launched the Green and Sustainable Finance Data Source Repository in 2022 to help the financial industry locate data sources for climate risk management that included HKSAR Government data sources.6 • Developing markets – Hong Kong’s ambition to be a leading green fundraising centre required constant innovation. The government’s Green Bond Program expanded the city’s green bond market;7 and Shenzhen and Hainan local governments raised their first offshore RMB-denominated green/sustainability bonds in Hong Kong in 2021 and 2022 respectively.8 HKMA’s own Exchange Fund incorporated ESG principles in its investments. While still nascent, HKEX’s interest in developing carbon credits was on-going although it would take time to sort out standards and increase liquidity. and many had developed plans to enhance their climate strategies and risk-governance frameworks. HKMA would conduct another stress rest between 2023-24.9 In regulating the securities and futures market in Hong Kong,10 SFC and HKEX worked closely together alongside HKMA to support the development of a global uniform set of sustainability reporting standards emerging through the International Sustainability Standards Board (ISSB),11 which would eventually be adopted in Hong Kong. The disclosure challenges include the lack of data from supply chains, the standards were not yet interoperable across jurisdictions, and companies were at varying stages of readiness in their sustainability practices, including reporting. Companies needed time to develop internal systems to adapt to new disclosure requirements, although surveys of listed companies in Hong Kong in 2021 were encouraging as many of them were on the way to evolving their practices. While ISSB was finalising its standards, transition and phasing in measures would be needed around the world and regulators in Hong Kong were working with their mainland and Asia-Pacific counterparts to ensure a smooth transition. Expanding markets HKEX saw itself as a “change agent” to develop the ESG space and in developing global carbon markets.12 In March 2022, it partnered with the China Emissions Exchange (CEEX) in Guangzhou to cooperate on promoting sustainability through carbon finance. HKEX and CEEX would develop a voluntary carbon emission reduction program in the GBA to support mainland China’s efforts to peak carbon emissions by 2030 and reach carbon neutrality by 2060. In July, HKEX launched the Hong Kong International Carbon Market Council, a partnership with leading corporates and financial institutions to develop an international carbon market that would leverage Hong Kong’s position as a leading global financial centre, which led to the launch of CORE Climate in October 2022, a new international carbon marketplace to connect capital with climate-related products and opportunities in Hong Kong, Mainland China, Asia and beyond. CORE Climate provided a platform for participants to source, hold, trade, settle and retire voluntary carbon credits, and it allowed for trades to be denominated in HK Dollar or RMB. 6 Financing the Climate Transition Choi Hoi Hui, HKMA Megan Tang, SFC Ken Chiu, HKEX Evolving regulation As climate change represented a major global risk, finance should contribute to the global effort to decarbonize. HKMA had embedded climate risk in its banking policy. It had conducted a pilot climate risk stress test in 2021 to evaluate the overall climate resilience of the banking sector in Hong Kong. The results indicated that the banks had strengthened their capabilities for measuring and assessing climate risks,