Building a World Top Green and Sustainable Bond Hub

33 A Roadmap for Hong Kong as a Green and Sustainable Bond Hub Nonetheless, there is a need for clarity on the regulatory implications regarding adopting a taxonomy in Hong Kong, which could influence its widespread acceptance and application. Currently, the Hong Kong Taxonomy functions as the city’s local application of the CGT rather than an actual framework. The voluntary use of the taxonomy may lead to risks of greenwashing if it is not implemented and regulated properly. Moreover, there is a need for a robust data environment that connects corporations and financial institutions using taxonomies, which can be challenging to establish and maintain. 4.2 Action 2: Play a Proactive Role in Designing an Integrated Framework for Green Bond Principles Organizations like the CBI and the ICMA have conducted numerous consultations on identifying the similarities and differences between the GBP and Climate Bond Principles, with a view to harmonizing the green bond standards. The current major players in the international green bond market have held several dialogues on an integrated green bond framework. In March 2015, four multilateral development banks including the African Development Bank, the European Investment Bank, the International Financial Corporation and the World Bank jointly worked to make a pilot framework entitled Green Bonds Working Towards a Harmonized Framework for Impact Reporting. Following that, 11 intentional financial institutes refined the document in December 2015. The framework outlines core principles and recommendations in order to provide issuers with a reference to develop their own reporting. It recommends core indicators for energy efficiency and renewable energy, and provides reporting templates that issuers can adapt based on their own circumstances. A harmonized framework for impact reporting in other sectors has been gradually released in recent years, for example, the ICMA published it s Harmonized Framework for Impact Reporting in June 2022. Hong Kong recognizes multiple green bond standards, which is an advantage for attracting bond issuers. The city should make use of this advantage to actively participate in dialogues and take into account the opinions of international market participants to better grasp global trends in the design of green bond standards. Hong Kong is well positioned to help design and realize the goal of forming an integrated framework for green bond principles. It also has a good foundation to play this role. On the one hand, as an international financial center it has always been known for its judicial system which is in line with Western standards, On the basis of adopting the CGT and coming up with the Hong Kong Taxonomy, we advise the Hong Kong Government to formulate a Hong Kong-labelled framework that assists mainland or other international issuers in utilizing the CGT and facilitates the green transformation in the economy. In the current CGT, the EU criteria are stricter and more detailed in relation to green architecture and low carbon transport, while China is stricter regarding renewable energy. The China and EU criteria differ in sustainable water management, sustainable waste management and new infrastructure. As a living document, the Hong Kong Taxonomy allows for its continuous evolution and adaptation to new technologies, scientific advancements, and market needs. Through this, Hong Kong has a role to play in specifying quantitative thresholds and making use of the metrics to help issuers and investors to comprehend the processes better.