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Hong Kong Monetary Authority Proposes Mandatory Green Rules for Banks
The Hong Kong Monetary Authority (HKMA) is actively considering making its recently issued green taxonomy framework mandatory for the banking sector to strengthen the growth of sustainable finance in the region. The taxonomy, designed to aid banks and investors in evaluating the sustainability of economic activities, covers 12 activities across four key sectors.
Potential Shift to Mandatory Adoption
At a recent event, Kenneth Hui of HKMA announced the potential shift from voluntary to mandatory adoption. The goal is to provide clear definitions of what constitutes “green” activities, fostering a reliable investor base. HKMA is further working on expanding the taxonomy to include additional sectors like hydrogen and hydropower, while also incorporating transition financing and industry-specific guidance.
Aligning with International Standards
Ma Jun, from the Hong Kong Green Finance Association, emphasized the importance of harmonizing different sustainability taxonomies to combat greenwashing and minimize costs. He sees Hong Kong as a potential testing ground for creating interoperable standards.
The Hong Kong Exchanges and Clearing (HKEX) recently completed a consultation on enhancing climate-related disclosures under its ESG framework. The new requirements align with the International Sustainability Standards Board (ISSB) standards.
Navigating Challenges in Implementation
Michael Duignan of the Securities and Futures Commission acknowledged the challenges of applying ISSB standards to the Hong Kong market.
“One of the biggest challenges for us was to introduce rules that straddle the [two jurisdictions] because China is in a different place in its development compared to Hong Kong,” Duignan said. “That meant we had to base the standards on ISSB, but introduce all the flexibility built into ISSB.”
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