A Paradigm Shift Towards a Green and Sustainable Finance Center

33 Hong Kong in Transition: A Paradigm Shift Towards a Green and Sustainable Finance Center across three pivotal domains: (1) the EU Taxonomy, (2) ESG ratings, and (3) transition finance. These initiatives showcase the EU’s commitment to promoting green finance and building a more sustainable economy. In November 2020, the British Chancellor of the Exchequer raised the following strategic positioning of the UK after Brexit: to be the world-leader in the use of green finance, and to develop open, innovative and attractive financial services. Key policies like the Green Finance Strategy in 2019 and the Green Financing Framework in 2021, along with the updated 2023 Green Finance Strategy, underscore the UK government’s commitment to catalyzing sustainable investments. The 2023 Green Finance Strategy further outlines measures to incentivize private sector involvement in green projects, enhance transparency in financial markets, and develop innovative financial products to support the transition to a low-carbon economy. By aligning financial incentives with environmental objectives, the strategy seeks to accelerate the shift towards sustainable finance and mitigate climate change risks. In August 2016, the People’s Bank of China, Ministry of Finance, National Development and Reform Commission, Ministry of Environmental Protection, China Banking Regulatory Commission, China Securities Regulatory Commission, and China Insurance Regulatory Commission jointly issued the Guidelines for Establishing the Green Financial System . It explicitly proposed that China is to build the world’s first complete green financial policy system. In June 2017, China’s State Council decided to designate five pilot zones for green finance reform and innovation. Two years later, in 2019, China became the largest issuer of green bonds and the following year, China’s first green finance regulation, Regulations of the Shenzhen Special Economic Zone on Green Finance , was passed, which became the second green finance regulation in the world after the EU. 4.2.2 The Rise of Green Finance From a global perspective, the emerging consensus of green transformation unites societies and produces collective action towards greening their systems. After the Paris Agreement stated that more investment in a low carbon economy and a significant shift in the allocation of resources are necessary, green finance officially entered the public eye and began a journey of popularization. It goes hand in hand with the green development plan and carbon neutrality target. As the G20 Green Finance Synthesis Report defined it, green finance refers to “financing of investments that provide environmental benefits in the broader context of environmentally sustainable development”. Concepts closely associated with green finance are climate finance and sustainable finance etc. From a broad perspective, these terms collectively capture activities related to the interactions between the natural environment and humans’ financial activities. Nevertheless, the nuances of meaning between “green”, “climate” and “sustainable” have been gradually clarified. “Climate finance” is usually understood as a subset of green finance, referring to financial activities addressing climate change. “Green finance” includes financing that provides environmental benefits such as climate finance but excludes social and economic aspects. “Sustainable finance” includes all environmental, social, governance and economic aspects, covering all financing activities that contribute to sustainable development. After the COVID-19 pandemic, the urgency of dealing with the severe economic crisis brought about by the global health crisis coincides with the urgency of tackling environmental and