HK to become top green finance hub

November 2, 2022

Financial Secretary Paul Chan

Looking to the future, the potential and opportunities of Hong Kong as an international financial centre (IFC) is just boundless, thanks to the unique connectivity with the Mainland and the world. We are determined to excel in many areas. Among them, our fund-raising platforms, our role in the renminbi's internationalisation, the unique connect schemes with the Mainland, asset and wealth management, centre for risk and corporate treasury management and much more. The list could be long.


But to echo this morning's inspiring panel discussions, please allow me to highlight Hong Kong's development in just two areas. Green and sustainable finance, and fintech.


Around the globe, governments have been drawing up action plans to peak greenhouse gas emissions and achieve carbon neutrality, seeking to reach the targets in the Paris Agreement.


The Mainland has set out its 3060 Dual Carbon Targets: that is, peaking carbon emissions by 2030 and achieving carbon neutrality by 2060. In Hong Kong, we set our target to reach carbon neutrality by 2050.


Along the global momentum, Hong Kong has this vision: to become a premier centre for green and sustainable finance that serves the green transformation in the Mainland, the region and the world.


On this, we have much confidence. The National 14th Five Year Plan supports Hong Kong's development into a green finance centre, in particular Hong Kong's strategic position in the Guangdong-Hong Kong-Macao Greater Bay Area, where green transition is high on demand for this burgeoning, 11-city region with a population of 86 million.


Adherence to high international standards is also why we have good prospects to succeed. We have reporting and disclosure standards that align with international best practices. We are seeking to adopt a green classification framework along the Common Ground Taxonomy. Green bonds issued in Hong Kong are trusted by global investors.


In realising this vision, we lead by example. We have issued government green bonds since 2018. Through the concerted efforts of regulators and the industry, green and sustainable debts issued or arranged in Hong Kong reached more than US$56 billion in 2021, four times that of the previous year, and top in Asia. Deep liquidity aside, the market covered a diversified investor base and project categories. To encourage the development of green finance, we continue to provide expenses subsidies for eligible issuers and borrowers for their borrowings in Hong Kong.


In many ways, we are setting the benchmark and standards for green finances in this region. Last year, we became the first Asian government to issue 30-year and 20-year green bonds denominated in US dollars and euros respectively, which were the longest tenor of Asian government bonds at the time. The response from investors was overwhelming.


Mainland provincial and municipal governments are supporting our efforts as well. Shenzhen, our neighbouring city, was the first mover, and they issued their first ever offshore RMB green bonds worth RMB3.9 billion in Hong Kong last year. It was followed by the provincial government of Hainan, which announced just last week the issuance of blue and sustainable bonds worth RMB5 billion in Hong Kong, for marine and sustainable projects.


Green finance seeks to support humanity's responsibility for the environment, and we do not forget that this is what our people should own and benefit from. In May this year, we issued the inaugural retail green bonds of US$2.5 billion, which was also the largest globally. The costs are slightly more expensive and administration a little more burdensome. But it will reinforce our residents' sense of ownership of our green vision and help us achieve financial inclusion goals.


Allow me to turn to the future of finance. The key word to this is definitely “fintech”.


Hong Kong's strengths as an IFC and as part of the Guangdong-Hong Kong-Macao Greater Bay Area facilitate our development of a strong fintech sector: we have an extensive presence of top global financial institutions here providing a complete range of financial services; a deep pool of financial expertise and talent; an internationally recognised regulatory regime and sophisticated IT infrastructure, etc.


Building on this foundation, we have been adopting a multipronged approach in fostering fintech development. They include:


  1. Forward looking and facilitating policies and measures. For example, a Fintech 2025 strategy has been promulgated by the Hong Kong Monetary Authority (HKMA) to help all banks to go fintech. Sandboxes of all the financial regulators are linked up to facilitate development of cross sectoral fintech solutions.


  1. Encourage innovation. For example, we issued on October 31, a policy statement on virtual assets (VA). We make our policy stance clear to the markets to demonstrate our determination to explore financial innovation together with the global VA community.


  1. Development of essential infrastructure. For example, a faster payment system connecting all bank accounts and electronic wallets for individuals, enabling them to make instant transfer of funds among them. The Commercial Data Interchange allows businesses to share operational data on a consent basis, so the banks may make better informed assessments of loan applications while SMEs (small and medium-sized enterprises) may gain access to financing services more conveniently.


  1. Leveraging on our unique super connector role to facilitate cross-boundary collaboration in the development and application of fintech solutions. Cross-boundary supervisory sandbox in the Greater Bay Area is a recent example. Besides, an online platform will be launched to connect the fintech companies to users, partners and investors in the Mainland, Southeast Asia and beyond. Meanwhile, the HKMA is also working with the Bank of International Settlements and three peer central banks on the mBridge project, exploring the use of Central Bank Digital Currency (CBDC) to expedite cross-border trade settlements.


  1. Capacity building. We ensure there are facilitating and welcoming polices to attract Mainland and overseas talent while providing subsidised training and education opportunities for our own locals. Fintech qualifications have been established under the Qualifications Framework so as to provide a clear career path to fintech practitioners. The recent Policy Address of the Chief Executive has also rolled out even bolder measures to attract talent.


  1. Nurturing the ecosystem. We provide subsidies for firms in their technology adoption; provide an incentive for startups and private equity firms to establish here, and we have set up funds to support and invest in fintech companies at various stages of development. Last year, we rolled out an electronic consumption voucher scheme. As a result, consumer accounts and merchant accounts of the relevant stored-value facility operators have increased by more than eight million and 150,000 respectively from the year before. Application of electronic payment has now infiltrated into different businesses and walks of life, from shopping centres to wet market, from hawkers to taxi drivers.


We have come a long way in a short time. Five years ago, Hong Kong counted no more than 180 fintech companies. Today, we are home to more than 800 companies, many of them are founded by entrepreneurs from the Mainland, France, Israel, the UK and other places. We also have nurtured several local unicorns.


But we do not stop here. The virtual asset policy statement mentioned earlier sets out our vision, regulations, thoughts on investor protection and attempts in emerging areas such as non-fungible token (NFT), tokenisation, and eHKD.


As an IFC, Hong Kong is open and inclusive towards global innovators. We are working with the financial regulators towards providing a facilitating environment for the sustainable and responsible development of the virtual asset sector in Hong Kong.


Financial Secretary Paul Chan gave these remarks at the Global Financial Leaders' Investment Summit on November 2.

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