Building a World Top Green and Sustainable Bond Hub

25 Challenges for Hong Kong’s Transition Towards the Green and Sustainable Bond Hub the CBI focuses more on climate policy and takes the guidelines a step further. It not only establishes the certification process, but also provides detailed industry-specific eligibility criteria. Hong Kong currently recognizes a variety of green bonds standards or principles. The HKQAA referred to a number of international and national standards or principles when it formulated the “Green and Sustainable Finance Certification Scheme”. In the section related to green bonds, it includes the GBP, ISO/DIS 14030 Environmental Performance Assessment Green Debt Instruments (Parts 1-4), the EU Technical Expert Group’s recommendations on European Green Bonds Standards, the Mainland China Proposals on green bonds standards and other standards. Because of this, issuers need to resort to external reviewers, audits and consultants to ensure the green character of projects. The differences among green bonds standards may potentially increase the risk of greenwashing in the green bond market and lead to investors’ withdrawal. For example, the green bond issuance by the Hong Kong Airport Authority in early 2022 for a Hong Kong International Airport expansion project has been criticized for potentially destroying the habitat of the endangered Chinese white dolphin. Therefore, while green bond standards play a vital role in transmitting green bond information from issuers to investors, thereby improving the market efficiency, the lack of harmonized standards will hinder information transmission and undermine investors’ confidence in green bonds. In fact, the inconsistency of standards is a common problem in the global green bond market. To address this problem, Hong Kong should work hard and play an active role as a major financial center. For example, the Luxembourg Green Exchange is currently working on integrating Mainland China’s standards with international ones. If Hong Kong wants to become a leader in the global green and sustainable transformation, it must contribute and find a way to solve this problem. 3.3 The Dual Pressure in External Review External review means that the issuer hires a qualified evaluation agency to confirm that the proposed or issued green bonds are consistent with the specific green bond framework or standard. The agency also provides independent opinions. This external review can take a variety of forms, such as second party opinion, certification, verification, rating and so on. Among them, second party opinion is the most popular form for green bond issuers. Before or after the issuance of bonds, the issuer hires an agency to assess whether the framework of green bonds to be issued is consistent with the framework that they claim to adopt. "Certification" refers to the situation before or after the issuance, by which the issuer hires the relevant institutions to evaluate the bonds according to national or international green certification requirements. The organizations authorized by the CBI can provide certification services according to internationally recognized certification standards. "Verification" refers to the situation after the bond issuance in which the issuer invites independent institutions with environmental expertise and verification qualification to provide guarantee for the use and distribution of green bonds. In the verification process, the environmental impact statements and reporting mechanisms should be consistent with the framework of the bonds