Green finance: Hong Kong should pick the more stringent China, EU yardsticks for defining climate-friendly projects, says think tank
- The city can play a bigger role in channelling funds into green projects in China if it sets its bar higher to meet the requirements of a broader range of investors, says Civic Exchange
- Doing so will enhance credibility and help Hong Kong cement its position as a sustainable finance centre, the think tank says
The city can play a bigger role in channelling international funds into decarbonisation projects in China if it sets its bar higher to meet the requirements of a broader range of international investors, said Civic Exchange research analyst Bon Cheung.
Introduction of the taxonomy will increase transparency across financial markets and enable consistent green finance policymaking, the city’s de facto central bank said in its sustainability report published in April.
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It aims to reduce so-called “greenwashing”, the act of making unsubstantiated claims about the environmental benefits of a product or practice.
The planned Hong Kong framework will be in line with mainstream international ones, including China and the EU’s common ground taxonomy, the report said.
More than 20 green taxonomies have been established internationally to bridge the knowledge gap between green finance practitioners and project engineers, said Deng Manshu, deputy head of the China programme at the Climate Bond Initiative.
The growing number of taxonomies and the fact they are revised over time as climate mitigation technology advances, make it challenging for investors to navigate cross-border investments, she said at a discussion hosted by the Civic Exchange on Tuesday.
To facilitate like-for-like comparison of green standards between China and the EU aimed at enhancing cross-border green finance flows, comprehensive technical research by a joint task force was conducted in 2021.
But within each activity, there are differences between the technical standards adopted by China and the EU. This is where Hong Kong should pick the more stringent one to be adopted in its proposed taxonomy, Cheung said.
The city should also include industry-specific greenhouse gas emissions reduction pathways with clear targets and timelines, he added.
Hong Kong is not the only financial centre vying to create a bridge between international capital and decarbonisation projects in China.
In April, mainland China and Singapore agreed to establish a joint task force to strengthen collaboration on green finance.
“To function as a super-connector, Hong Kong must adopt a framework that enables green capital flow between China and the offshore market.”
