Hong Kong Regulators Launch Sustainable Finance Steering Group

Initiated by the Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC), the newly established Green and Sustainable Finance Cross-Agency Steering Group aims to coordinate between different sectors to push the city into the forefront of sustainable finance. The launch follows mounting scrutiny over the global finance industry over its climate-damaging practices and calls for greater responsibility to take action on the greatest threat facing the planet today. 

Aiming to coordinate the management of climate and environmental risks into the financial sector in Hong Kong, the new Steering Group will seek to examine policy and regulations into green and sustainable finance and facilitate policy direction to ensure a cohesive sustainable finance strategy. The overall aim of the group will be to guide Hong Kong’s position as a leading green and sustainable finance in the Asian market and globally.

The new Steering Group launched by the HKMA and SFC will be joined by the government’s Environment Bureau, the Financial Services and Treasury Bureau, the Hong Kong Exchanges and Clearing Limited (HKEX) the Insurance Authority as well as the Mandatory Provident Fund Schemes Authority (MPFA). 

“Climate change is a source of financial risk impacting the entire financial sector and is highly relevant to our mandate. The transition will prompt structural adjustments to the global economy, bringing both risks and opportunities,” said Eddie Yue, chief executive of the HKMA and co-chair of the Steering Group at its inaugural meeting held earlier this week. 

A core part of the work that the new Steering Group will undertake is ensuring that companies “disclose the impact of climate change on their businesses and that asset managers integrate climate factors into their investment processes,” explained co-chair Ashley Alder, CEO of the SFC.

Earlier this year, a report by international audit and advisory firm Mazars and independent think tank OMFIF revealed that central banks and regulators are now feeling the pressure to make radical changes to tackle the climate crisis. In its analysis, the majority of central banks and regulators now see climate change as a major threat to stability, and will begin rolling out climate stress tests, setting sustainability criteria and mandating climate-related financial disclosures.

The report’s findings mirrored that of the World Economic Forum (WEF) annual risks report released in January. For the first time in its 15-year history, the WEF report saw environmental issues dominate the top 5 spaces in the index of issues that will majorly impact world business and financial institutions over the next decade. 

These included damage incurred from extreme weather events, failure of climate mitigation and adaptation, human-caused disasters, mass biodiversity loss and major natural disasters – all of which banks and firms around the world must react to now. 

Investor sentiment has also undergone a shift in recent months as the concerns about the climate crisis continues to grow. The amount of capital moving into environmental funds last year in 2019 broke records, quadrupling to US$20.6 billion, according to Illinois-based financial services firm Morningstar. The trend has accelerated amidst the coronavirus crisis, in particular amongst rich Asian investors who are displaying increasing interest in sustainable investments with public health and environment top of mind, according to UBS. 

Lead image courtesy of HKMA.