International Experiences in Green Finance Development

39 Evolution of Green and Sustainable Finance Policies in Hong Kong finance ecosystem. Secondly, building upon the groundwork laid in the previous phase, key initiatives, including support for green bonds and the issuance of government green bonds to stimulate the market, have been renewed and updated. Thirdly, there has also been a growing emphasis on capacity building and taxonomy-related topics. One significant development is the increased involvement of various government departments in the ongoing construction of Hong Kong’s green finance infrastructure. The HKMA and SFC, two pivotal agencies in the initiative, have continued to advance their respective efforts in the domains of green and sustainable banking and the management and disclosure of climate- related risks by fund managers. In June 2020, the HKMA released the White Paper on Green and Sustainable Banking outlining its initial supervisory approach to address climate-related and broader sustainability issues. In October 2020, the SFC published the Consultation Paper on the Management and Disclosure of Climate-related Risks by Fund Managers, aiming to incorporate climate-related risks into investment and riskmanagement processeswhilemeeting the growing demand for climate risk information. Simultaneously, the IA and MPFA have joined this collaborative effort. In May 2021, the IA launched the Pilot ILS Grant Scheme, designed to attract and incentivize insurers and sponsors to issue ILS in Hong Kong. In November 2021, the MPFA introduced the Principles for Adopting Sustainable Investing in the Investment and Risk Management Processes of MPF Funds, laying out an ESG integration framework for trustees of Mandatory Provident Funds. Moreover, previously established initiatives that support green bonds and government green bonds issuance have been enhanced. In May 2021, the HKMA introduced an upgraded version of the Green and Sustainable Finance Grant Scheme. This program, announced in the 2021-22 Budget, aims to bolster green and sustainable bonds issuance and lending in Hong Kong by providing subsidies to eligible issuers and borrowers for bonds issuance expenses and external review services. Another pivotal update occurred in February 2022 when the FSTB expanded the GGBP. This expansion doubled the borrowing ceiling of the GGBP to HK$200 billion (approximately US$25.6 billion), allowing for a more extensive issuance of green bonds. This move aimed to explore different currencies, project types, and issuance channels, providing the government with greater flexibility. Lastly, this phase has seen increased attention given to capacity building and taxonomy development. In October 2022, the Center for Green and Sustainable Finance under the CASG introduced the Pilot Green and Sustainable Finance Capacity Building Support Scheme. This scheme facilitates talent development within the green finance sector by subsidizing training and professional qualification acquisition. Furthermore, in May 2023, the HKMA released the Discussion Paper on the Prototype of a Green Classification Framework for Hong Kong. The aim of this is for the Green Classification Framework to be adopted in the local market and provide a standardized framework for classifying and labeling financial products and investments based on their environmental sustainability. The Green Classification Framework is also intended as an analytical tool to compare how green activities are defined across the EU and China’s taxonomies.