2018: The Year That Sustainable Finance Took Root in Hong Kong

2019-01-28

Hong Kong’s sustainable finance industry finally took root last year, with key developments from investors, banks and the government marking the start of an evolution for our global financial centre.

Sustainable finance (SF) has had a slow start in Hong Kong, but 2018 brought many significant changes and developments that show that the local finance industry is moving in the right direction. It was a year of new organisations, increased interest and concrete actions that create a framework for the coming years of development.

One in four US dollars were invested sustainably in 2018 in the United States. The global sustainable investment pool has reached US$ 22.9 trillion, but Hong Kong, even as an international finance hub, only accounts for about 0.06%, or US$ 13.5 billion, of the total. The good news is that the Hong Kong SF market has made progress in crucial areas which signal that there is more growth to come.

Until now, frustrated SF investors could rightly say that the banks and the government were not providing the tools and rules needed to build a thriving SF market. Last year that complaint lost some of its currency as many of the crucial building blocks of an SF industry were put in place.

For example, an increasing number of banks began to develop in-house ESG capabilities, including research, to service growing demand from private investors. This creates

hope that research will eventually translate into financial products for private investors and in time the broader retail market.

Key Developments

The Hong Kong government threw its weight behind SF development in 2018 and took the key steps needed to create a strong local market. It committed to a green bond issuance programme and established the HK Green Bond Grant Scheme to subsidise the costs of obtaining certification under the HK Green Finance

Certification Scheme. The Securities & Futures Commission (SFC) Strategic Framework for Green Finance helped raise the credibility of the city’s green finance product offerings. The Financial Services Development Council (FSDC) released an ESG Strategy for Hong Kong with six key recommendations. The Hong Kong Monetary Authority (HKMA) held its first conferences on green and social bonds in collaboration with the International Capital Market Association and the People’s Bank of China.