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Letters | Push Hong Kong banks to wash their hands of coal projects
- Readers discuss the need for a stronger climate-related financial disclosure policy, the bitter disappointment that was the UN climate summit, and the cost effectiveness of a carbon footprint calculator
Reading Time:4 minutes
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Near the end of the COP26 climate conference, the US and China agreed to enhance climate action to keep global temperature increases between 1.5 and 2 degrees Celsius under the Paris Agreement framework. One important strategy for the global economy to transition to green energy is to increase the cost of capital for the coal and oil industries through fossil fuel divestment.
Yet, major banks such as Standard Chartered and Bank of China are still providing enormous amounts of capital and loans to international coal and oil projects. To incentivise fossil fuel divestment, the Securities and Futures Commission of Hong Kong should revise its disclosure policies for all publicly listed banks and investment funds on the climate-related risks of their investees and loan recipients.
Recently, the SFC announced that from November 2022, licensed asset managers with at least HK$8 billion (US$1.03 billion) of clients’ assets in Hong Kong would be required to disclose greenhouse gas emissions data of their investees. While this move can help investors manage climate-related risks in a global economy transitioning to green energy, the requirement does not apply to banks.
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To better protect investors’ interests, the commission should expect all publicly listed banks in Hong Kong to assess and disclose the climate-related risks of projects receiving their investment and loans. Such a requirement would pressure the banks to make more environmentally responsible investment and loan decisions.
The SFC also expects public companies in Hong Kong to follow the recommendations of the Task Force on Climate-related Financial Disclosures to disclose the greenhouse gas emissions from their own activities as well as indirect emissions from their consumption of electricity, heat or steam by 2025. Yet, the task force is primarily concerned with the carbon emissions resulting from the consumption of fossil fuels, without paying much attention to the climate risk from the suppliers of dirty energy.
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As the investors and creditors in coal and oil industries will face increasing climate-related risks including the repricing of fossil fuel reserves, climate lawsuits and reputation risks related to community perception, the SFC should issue clearer guidelines on how such financial institutions should disclose these risks and discourage them from financially supporting dirty energy industries.
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