Hong Kong seen well-positioned to boost cross-border transition finance

Hong Kong can harness its financial strengths and role as a bridge between the Chinese mainland and global markets to advance cross-border transition finance, industry heavyweights said at the 18th Asian Financial Forum on Tuesday.

Speaking at a panel themed "Accelerating Flows of Transition Finance: Shaping a Sustainable Future for GBA and Beyond", Daniel Fung, vice-chairman of Hong Kong's Financial Services Development Council, noted that the Hong Kong Special Administrative Region is uniquely positioned to "unify" different carbon markets.

Since 2013, regional carbon trading markets had been rolled out in eight mainland provinces and cities, before the launch of a national carbon market in 2021. Fung said the challenge is how to integrate these domestic markets with their international counterparts. Building on its experiences in facilitating stock and bond connectivity with the mainland, Hong Kong can promote the establishment of a common carbon market, Fung said.

This would facilitate international investors' participation into the mainland market and enable domestic investors to tap into global opportunities, he added.

Meanwhile, the transition to a greener economy requires substantial funding as Standard Chartered estimated in a 2022 report that emerging markets need an additional $94.8 trillion in transitional finance to achieve net-zero emissions by 2060.

Mary Huen Wai-yi, CEO of Standard Chartered Bank (Hong Kong), said, "Hong Kong has the infrastructure and expertise required to help raise and direct capital to enable decarbonization in Asian emerging markets."

She added that the burgeoning demand for transition finance on the mainland has also presented a golden opportunity for Hong Kong to connect capital with these needs, which could position the city as a regional hub for green finance.

Joseph Chan Ho-lim, undersecretary for financial services and the treasury of the HKSAR government, said, "We encourage more issuers and borrowers to make use of the sustainable finance platform in Hong Kong."

Last year, the government extended its Green and Sustainable Finance Grant Scheme for an additional three years, now running through 2027. To date, the initiative has disbursed more than HK$290 million ($37.25 million) to 500 green and sustainable debt instruments issued in the city, with a total debt value of around $140 billion.

To improve issuance efficiency, Hong Kong put itself among the first global markets to roll out tokenized government green bonds. Additionally, the government launched the Green and Sustainable Fintech Proof-of-Concept Funding Support Scheme last June, to provide early-stage funding for tech innovators. So far, 60 projects from 39 applicants have received the green light.

John Murton, senior sustainability adviser at Standard Chartered Bank, agreed with this approach. He said while technologies to drive green transition exist worldwide, many of them are still a long way from commercialization. Government backing is crucial to bridge that gap, he noted.