The world is facing challenges posed by global climate change, and sustainable and green finance offers companies the option to take responsible business decisions and actions by “greening” daily business operations.
Grace Hui: HKEX’s STAGE Promotes Sustainable and Green Finance Development
As the market demand for green and sustainable investments grows rapidly, Hong Kong Exchange and Clearing Limited (HKEX) launched the Sustainable & Green Exchange (STAGE) on 1 December.
STAGE is Asia’s first multi-asset sustainable investment product platform to support growing global demand for sustainable finance. “Through setting up STAGE, we want to support the growth of Asia’s sustainable finance market by increasing awareness, accessibility, data availability, and transparency of green and sustainable investment products,” said Grace Hui, Head of Green and Sustainable Finance of HKEX. “Our ultimate goal is to channel future capital flows to sustainable financial markets and support the transition of local markets towards sustainability.”
STAGE features 29 sustainable-themed investment products initially
As an online product repository, the STAGE platform at launch features 29 HKEX-listed sustainable-themed financial products from leading Asian corporates. These products include sustainability, green, and transition bonds from issuers across a variety of sectors including utilities, transportation, property development and financial services, as well as ESG (Environmental, Social, and Corporate Governance)-related exchange traded products. The scope of the product repository will expand over time across asset classes and industries in Hong Kong and beyond.
Through STAGE, issuers can provide investors with more information on their sustainable investment products, facilitating information access and transparency. Hui added that issuers included on STAGE must provide additional voluntary disclosures on their sustainable investment products, such as use of proceeds reports and annual post-issuance reports, so that investors can more conveniently access reliable information on sustainable investment in the region. At the same time, the information and data will act as a benchmark for issuers seeking to raise funds for their sustainable projects, as well as contribute to the standardization of sustainability metrics.
Around USD30 trillion is invested in the sustainable finance market worldwide, but less than 1% of that is in Asia. However, in Hui’s view, with increasing government and policy support, Asia’s sustainable financial market will have growing influence in terms of business and investment.
Investors place value on ESG performance
Hui mentioned that the ESG performance of listed companies has become an important investment decision factor for institutional investors, “A structured and well-thought-out approach to ESG reporting helps companies and investors identify the strengths and weaknesses of a business, as well as detect and mitigate ESG risks. Consistently applying ESG principles to business strategy formulation will make companies more agile to deal with sudden changes.”
Citing an example, she said that due to Covid-19-related market disruptions, some companies are looking at their supply chain in greater detail to ensure that they have a certain and sustainable operational model, “This approach of integrating ESG factors into supply chain management is a critical part of good business planning and ESG preparedness for almost all businesses.”
Hui said that STAGE will strive to be an educational and promotional platform providing extensive resources such as case studies, webcast videos, guidance materials, research papers and other publications to help market participants enrich their understanding of sustainable finance, sustainable financial products and ESG.
Lam Po-hing: Professional Certification Strengthens the Confidence of Investors and Stakeholders
Green and sustainable finance is an important strategic tool for promoting development and regional cooperation in the Greater Bay Area and the “Belt and Road Initiatives”. The 14th Five-Year Plan, released last November, mentioned that China will implement in-depth sustainable development strategies and promote green transformation of the socio-economic landscape.
Leveraging its clear advantages in developing green and sustainable finance, Hong Kong can establish a gateway market for Mainland issuers to connect with international investors. The Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area, promulgated by the Central Government in 2019, supports Hong Kong’s development into a green finance center and setting up an internationally recognized green bond certification institution. The Policy Address issued late last year stressed again that the HKSAR Government will work in conjunction with the development of the Greater Bay Area to promote green finance.
Attaching importance to corporate ESG performance
Lam Po-hing, CEO of the Hong Kong Quality Assurance Agency (HKQAA), said that the HKQAA plays an important role in promoting transparency and trust in green and sustainable financial markets, establishing a conformity assessment system for green financing projects. “At the same time, it facilitates investors’ selection of suitable green and sustainable debt instruments in the market, directing more funds to the development of green financing to contribute to addressing issues such as climate change and environmental protection.”
For over 30 years, the HKQAA has been dedicated to delivering new conformity assessment services to promote the continuous improvement of the business community and society. Lam said that with the emergence of concepts such as social responsibility, environment, society and corporate governance (ESG) and sustainable development in the international market, the HKQAA has over the past decades been actively adapting to the needs of the business community to integrate the concept of sustainable development into their core business, assisting companies in improving ESG performance and promoting responsible investment.
Launch of Green Finance Certification Scheme
The HKQAA started to provide verification services for sustainability reports in 2007; launched the HKQAA CSR Index in 2008 to assess corporate social responsibility performance; began to provide assessment and rating services on listed companies’ sustainability performance for the Hang Seng Corporate Sustainability Index Series in 2014, and release annual overall rating research reports.
Lam said that the HKQAA launched the Green Finance Certification Scheme in 2018 to help improve the credibility of green bonds and loans. Total certified green finance issuances to date have surpassed USD17 billion. “The following year, we launched the Green Finance Certification Scheme - Green Fund to support the SFC’s green finance strategic framework and launched the Green Finance Certification Scheme - ESG Fund to promote more information disclosure and strengthen market confidence in sustainable financial products.”
Building a platform for green economic development and regional cooperation
The HKQAA is also committed to building a regional interactive platform to promote green finance and responsible investment in the Greater Bay Area and Shaanxi Province, as well as to conduct relevant research. It has also published a study report on sustainable financing in the Greater Bay Area and two books on the development of green finance and social responsibility in Hong Kong.
At the same time, the HKQAA actively participates in international standard development for sustainable finance, contributing its knowledge and experience in the fields of social responsibility, sustainable development and responsible investment. According to Lam, in addition to serving as an observer of the Green Bond Principles, the HKQAA’s expert has been nominated by the China National Institute of Standardization and the HKSAR’s Innovation and Technology Bureau to directly participate in the formulation of ISO international standards for green and sustainable finance.
In response to the ongoing pandemic, the HKQAA developed the COVID-19 Resilience Finance Certification Scheme last July, aiming at encouraging more issuers to direct capital to projects related to COVID-19 prevention, control and recovery. It also launched the Green Loan e-Assessment online platform to encourage more different businesses to use green loan assessment service for development and participation in green businesses and investments in environmental protection projects. Lam stressed that the HKQAA is determined to provide more solutions for businesses and society in the new normal, working together with various sectors to deal with the challenges ahead and to build a sustainable future.
