Can Hong Kong Become Asia s Green Finance Hub?

Transcription

1 Can Hong Kong Become Asia s Green Finance Hub? International Climate Change Conference 2017 Pat Nie Woo Partner 21 April 2017

2 Green Bonds and Green Finance 2

3 What is a Green Bond? Investors are creditors in the issuing entity Fixed interest coupon and principal repaid at maturity Bonds traded in the securities market following issuance Debt security issued to exclusively support climate related or environmental projects Investors evaluate: Financial (rating, maturity, coupon, price); and Environmental purpose of the projects the bonds intend to support 3

4 Types of Green Bond Standards Source: 4

5 Green Bond market development Source: 5

6 Green Bond issuance by region Source: 6

7 The PRI is the world's leading proponent of responsible investment. Over 1,400 investment managers signatories Help investment community understand the implications of ESG factors Support integration of ESG into investment and ownership decisions Encourage investors to use responsible investment to enhance returns and better manage risks Supported by the UN, to engage with global policy makers 7

8 Sustainability Funds Source: 8

9 Developments in Hong Kong 9

10 Carrie Lam s manifesto Source: 10

11 Financial Services Development Council paper Hong Kong s Current Position on Green Finance Market-driven developments - First green bond issuance - Hang Seng Corporate Sustainability Index Series - Investor network Regulatory developments - Hong Kong developments - Securities and Futures Commission Principles of Responsible Ownership consultation Policy developments - Cleaner Production Partnership Programme - The Carbon Footprint Repository Source: Hong Kong Financial Services Development Council Hong Kong as a Regional Green Finance Hub (May 2016) FSD Paper No

12 New Developments in Hong Kong Hong Kong as a Regional Green Finance Hub Recommendations for Action NEAR FUTURE: 1. Strategic green bond issuance 2. Continuing coordination on green finance activities 3. Supporting growth of a green investor base 4. Developing and implementing green labelling and green project accreditation schemes MEDIUM FUTURE: 1. Public listings for green sector companies 2. Support for private equity 3. Climate and environmental risks to investment portfolios 4. Providing supporting services for emissions trading Source: Hong Kong Financial Services Development Council Hong Kong as a Regional Green Finance Hub (May 2016) FSD Paper No

13 Developments in China 13

14 China: 13 th 5-year Plan 13 th Five Year Plan ( ) 14

15 China: 13th 5-year Plan The overarching goal of the 13 th 5-year Plan is to create a moderately prosperous society by the 100 th year from the founding of Chinese Communist Party. The five major goals of the moderately prosperous society are outlined as: 1. Maintaining moderate to high speed economic growth, with priority in balance, inclusion and sustainability; 2. Improving the people s overall welfare, with a key focus on public services, employment rates, income disparities and the literacy rate; 3. Improving people s mannerisms and cultural understanding; 4. Increasing efforts in environmental preservation and sustainability; and 5. Reforming the policies to be more stable and mature. Beyond the goal of creating a moderately prosperous society, the plan emphasized that development in China needs to reflect five major concepts: 1. Innovation, 2. Regional development, 3. Green development, 4. Open development and international cooperation, and 5. Shared development and the people s welfare. Policies outlined in the plan were framed in terms of the aforementioned five concepts, along with a concluding statement regarding the need to strengthen the leadership of the Party. 15

16 China: 13th 5-year Plan Source: World Resources Institute 16

17 Establishing China s Green Financial System 14 Specific recommendations in 4 areas for establishing China s green finance system: Specialized Investment Institutions Financial Infrastructure 1. Green Banks 2. Green Funds 3. Green the Development Banks 7. Carbon Markets 8. Green Ratings 9. Green Stock Indices 10. Environmental Cost Analysis 11. Green Investor Network Financial Infrastructure 4. Discounted Green Loans 5. Green Bonds 6. Green IPO Legal Infrastructure 12. Green Insurance 13. Lender Liability 14. Compulsory Disclosure Source: Final Report of the Green Finance Task Force, April

18 Belt and Road Initiative Key areas of co-operation 1. Policy co-ordination 2. Facilities connectivity 3. Unimpeded trade 4. Financial integration 5. Peaceful co-existence The Silk Road Fund Set up as a limited liability company in December 2014 with its founding shareholders including: o China s State Administration of Foreign Exchange; o The China Investment Corp; o The Export-Import Bank of China; and o The China Development Bank US$40 billion Established to finance the Belt and Road Initiative Invest mainly in infrastructure and resources, as well as in industrial and financial cooperation Source: The Hong Kong Trade Development Council s Research Team The Asian Infrastructure Investment Bank New multilateral development bank Set up to complement and cooperate with existing multilateral banks to address infrastructure needs in Asia Focus on the development of infrastructure and other productive sectors in Asia, including o Energy and power; o Transportation and telecommunications; o Rural infrastructure and agriculture development; o Water supply and sanitation; o Environmental protection; o Urban development; and o Logistics. 18

19 Infrastructure Financing Facilitation Office 19

20 How can HK capture this opportunity 20

21 Multi-Stakeholder approach required Financial Services & Treasury Bureau Pls insert global coverage picture Hong Kong Green Finance Task Force 21

22 Others are acting fast Source: 22

23 Conclusion 23

24 Conclusion The Green Finance space remains nascent but growing fast The Government has the intention to develop Hong Kong into a Green Finance Hub Hong Kong must act proactively to develop the appropriate economic ecosystem to grow the Green Finance market China s policies align significantly with Hong Kong s ambition to be a Green Finance Hub Other cities globally are moving fast to capture this market 24

25 Thank you