The Way Forward in Green and Sustainable Financing in Hong Kong – A Reflection from the 2023-24 Budget
Hong Kong’s Financial Secretary, Paul Chan, delivered the 2023-24 budget on 22 February 2023 with the promotion of a green economy, sustainable development and China’s “3060 Dual Carbon Targets” at the forefront.
He laid out his vision to establish Hong Kong as a leading global green technology and financing hub.
As against such background, the Hong Kong government has implemented various policies and cooperated with different organisations and talents to spur growth in the green technology and finance sectors, including:
- establishing a Green Tech Fund to fund research and development projects helping Hong Kong to decarbonise and enhance environmental protection;
- issuing HK$800 million of tokenised green bonds under the Government Green Bond Programme, which was the first of its kind issued by a government globally. This was the result of a joint cooperation of the Hong Kong Centre for the Innovation Hub of the Bank for International Settlements (BIS) and the Hong Kong Monetary Authority, in a project called Project Genesis, which developed a digital infrastructure that tokenises green bonds. The tokenisation of bonds streamlines the usual lengthy process of bond issuance by removing intermediaries and allowing the issuer to distribute bonds directly to investors. The tokenisation of the issuance also permits bond subscription to be as low as HK$100, which broadens the investor base and increases retail investors’ participation in financing green projects. Furthermore, the digitalised system provides asset performance details to green bondholders, so they can monitor the use of proceeds and have greater certainty regarding the green impact of their investments;
- issuing US$5.75 billion equivalent of government green bonds denominated in US dollar, euro and RMB, which was the largest ESG bond issuance in Asia;
- providing grants for over 200 debt instruments since the launch of the Green and Sustainable Finance Grant Scheme in 2021, involving a total underlying debt issuance of nearly US$70 billion; and
- launching Core Climate by the Hong Kong Exchange and Clearing Limited, which is an international carbon marketplace for the trading of voluntary carbon credits and instruments. This platform seeks to connect capital with climate-related products and opportunities in Hong Kong, Mainland China, Asia and beyond. The attractiveness of this initiative is shown as more than 40 trades were completed in the first four weeks since its launch in October 2022, representing around 400,000 tonnes of carbon credits.
To accelerate the development of Hong Kong into an international centre for green technology and finance, the government is set to proceed in five directions, one of which is to facilitate “green projects to obtain capital more conveniently and flexibly through financial innovation apart from traditional financing channels”.
Concrete plans illustrated in Paul Chan’s speech include issuance of no less than HK$15 billion of retail green bonds in the next financial year; expansion of the scope of the Government Green Bond Programme to cover sustainable finance projects; review of the development potential and prospects of tokenised bond issuance; and consideration of policy initiatives to promote wider use of tokenisation technology in Hong Kong’s capital market.
The Hong Kong government’s proactive steps, as evidenced by its past initiatives and future ambitious goals, show its determination in promoting green finance and innovation – and establishing Hong Kong as a leading green technology and finance cluster.
With Hong Kong at the forefront of green, sustainability-linked and social financings and green bonds issuance, and the expertise and talent that accompanies them, we envisage that not only will the tokenisation of green bonds and trading of carbon credits continue to grow and gain traction in coming years, there will also be an increase in green and sustainable finance products to achieve Hong Kong’s green and sustainability objectives, alongside national advancement towards “3060 Dual Carbon Targets” and meeting growing global demand.
