Building a World Top Green and Sustainable Bond Hub

34 Hong Kong’s Transition Towards a Green and Sustainable Finance Center: Building a World Top Green and Sustainable Bond Hub its efficient financial supervision, and its institutional advantages being the freest economy. The convergence of green bonds standards with international standards will continue this advantage. On the other hand, the current green bond-related standards in Mainland China are gradually in line with the international mainstream standards since the Chinese version of the GBP is benchmarked against current international mainstream green bond standards, namely the GBP. Therefore, Hong Kong can consider converging with the international green bond standards, which will not only help it maintain its international institutional advantages, but also fit in with the current status quo of Mainland China to align with the international standards. Hong Kong should actively participate in an international dialogue on the harmonization of green bond standards. It should also consider adopting the requirements in the Unified Framework for Performance Reporting and prioritize relevant steps, so as to gradually achieve the goal of the integrated framework. In terms of actions, given that the integration framework requires multi-sectoral cooperation, we recommend that the CASG leads the coordination work. 4.3 Action 3: Increase Incentives for Green Bond Issuance In response to the high cost of external review, the HKMA launched the Green and Sustainable Finance Grant Scheme in May 2021. The plan initially was for three years. Upon receiving positive feedback from the market, it has been extended for another three years until 2027. Besides the scheme, the Hong Kong Government can still introduce further incentives to encourage green bond issuance. For example, the recognized external reviewer list currently includes prominent accounting and consulting firms such as Ernst and Young, Deloitte, KPMG and so on; certification service providers like HKQAA, Climate Finance Asia, the Construction Industry Council and ERM-Hong Kong Ltd. and so on. Qualified external reviewers are definitely more than the ones shown on the list. The government may consider opening the list for the Greater Bay Area. This would encourage potential external reviewers based in the Area to apply to be included on the list. By enlarging the eligible group for the scheme, the group of the issuers from the Greater Bay Area as a whole would also be increased. There are several good reasons for doing this. First, mainland issuers are familiar with the mainland external review agencies. This move will reduce the complaint that issuance of offshore green bonds is cumbersome. Second, this move will play a leading role in the development of green finance in the Greater Bay Area, and further promote the seamless mechanisms for cross-border finance between Hong Kong and the Mainland. Of course, it is necessary to research the mainland third party institutions and have a broad picture of who might be qualified before updating the rules on who can enjoy the scheme. In terms of the long-term strategy, it is recommended that the Hong Kong Government continues to improve the supervision of external review. Currently, external review is regulated differently in other parts of the world. The EU mandates external review for green bonds issuers, while Mainland China and Singapore strongly recommend issuers conduct an external review. Policy makers and market regulators in Hong Kong need to design a set