Green finance promotion strategies and market growth roadmap for Hong Kong
By Ir Dr Alex GBAGUIDI
The global and regional green innovation momentum for climate resilience is driving investors in Hong Kong to look for investment opportunities that are sustainable and meet the environmental, social and governance criteria. Green finance potentially addresses this issue because it shines a light on capital deployment that captures these factors. Financing growth in a way that is transparent on addressing sustainability challenges is a must for climate resilience. The development of green finance in Hong Kong could be stimulated through a number of instruments, including:
• Creation of local sovereign green finance: A local governmental sovereign green-labelled bond should be established. It would provide an example on transparency on the use of green finance proceeds and quantify Hong Kong’s leadership role in promoting green finance growth.
• Enhancement of green city investments: This could be implemented through an experimental field for exploring financial innovations in Hong Kong with economic restructuring targets. Emerging smart city technologies and projects will be attractive to green city finance.
• Diversification of corporate green finance: Incentives should be created to mobilise private green bonds and loans issuance, with appropriate transparency and disclosure on performance. It is also important to set the boundary for private green investments and encourage individualised design.
• Enhancement of securitisation: In a more market-oriented green financial system, securitisation of assets is essential for banks and corporates that are looking to develop their lending and investments without over-stretching their balance sheets. Potential areas might include green credit enhancement by development banks, warehouse facilities, green asset-backed securities, green mortgage-backed securities and carbon bonds.
• Ensuring the consistency of the green finance with the development of environmental industry: It is crucial that all green investments should be consistent with the need to develop the environmental industry. A permanent evaluation system should be set to assess and quantify the environmental effects of green projects with streamlined review and approval procedures in order to enhance green finance efficiency.
• Promotion of the social benefits of green finance: Going beyond the environmental performance, green finance must be innovatively associated with human development and quality life index.
The growth of the green finance market in Hong Kong also lies in reducing capital cost, mobilising direct foreign investments as asset, channelling household savings into a strong retail green finance market and assuring international recognition.
This article is contributed by Ir Dr Alex Gbaguidi with the coordination of the Environmental Division.