Hong Kong Monetary Authority publishes its Sustainable Finance Action Agenda

The Hong Kong Monetary Authority (HKMA) published its Sustainable Finance Action Agenda (the Action Agenda) on 21 October 2024. The Action Agenda sets out HKMA’s vision to further consolidate Hong Kong’s position as the sustainable finance hub in the region and support the sustainable development of Asia and beyond (see HKMA’s press release). 

The HKMA emphasised the pivotal roles of the banking and financial services sector in Hong Kong’s transition to a low-carbon economy. This blog summarises the key components of the Action Agenda, and the next steps to be taken by industry participants and the HKMA.

Key components of the Action Agenda

The Action Agenda consists of four areas and eight goals. 

The HKMA has set out action items for itself and action items for industry participants under each goal summarised as follows:

I – Banking for Net Zero

#1 - All banks to strive to achieve net-zero in their own operations by 2030 and in their financed emissions by 2050: 

The Action Agenda states that all banks should, in accordance with science-based pathways, strive to achieve net zero in their own operations by 2030 and in their financed emissions by 2050 with a view to supporting their clients and wider economy in the net zero transition. 

In addition, tentatively from 2030, banks should start making available their transition plans to the HKMA regularly on a “comply or explain” basis. The transition plans should consist of decarbonisation and financing targets, and clear action plans for achieving the 2050 net zero ambition, including a plan for managed phase-out of financing for carbon-intensive assets. The transition plans should be Paris-aligned, robust, actionable and up-to-date. 

The HKMA will support banks’ efforts in the preparation of transition plans by providing further guidance, support and tools, including guidelines on transition planning and climate scenario analysis, guidance on the use of tools for climate risk management, taxonomy for green and transition activities, as well as seminars and workshops. The HKMA will reflect the benefits of the transition planning efforts of banks when embedding climate considerations into the Supervisory Review Process.

#2 - All banks to enhance transparency on climate-related risks and opportunities:

The Action Agenda states that banks should align their disclosures with international frameworks and standards, including the ISSB standards and the Pillar 3 disclosure framework for climate-related financial risks to be issued by the Basel Committee on Banking Supervision (BCBS). 

To support banks to prepare for such disclosures, the HKMA will consider the current sustainability disclosure landscape and share banks’ insights and good practices before consulting the industry on the proposal setting out the timeline and approach to formulating regulatory requirements to implement the BCBS Pillar 3 framework and ISSB standards.

II – Investment in a sustainable future

#3 - Achieve net-zero emissions for the Investment Portfolio of the Exchange Fund by 2050: 

The Action Agenda states that ESG investments stand at the forefront of HKMA’s agenda. This includes reducing weighted carbon intensity of the Exchange Fund’s public equity holdings by 67% by 2030 from 2017 levels, and incorporating ESG factors into every investment decision, ensuring long-term sustainable value. The Exchange Fund is under the control of the Financial Secretary and manages the official reserves of Hong Kong. 

#4 - Support transition in the region through investment: 

The Action Agenda states that the Exchange Fund will deepen its dedicated focus on different transition opportunities and mobilise stakeholders to actively support its efforts through stewardship and engagement.

III – Financing net zero

#5 - Develop Hong Kong into the go-to sustainable financing platform of the region and beyond: 

The Action Agenda states that the HKMA will continue to encourage more borrowers, especially those from the Mainland and Belt & Road regions, to use Hong Kong to raise sustainable financing, and more local borrowers to raise green financing, with a target of having at least one third of all bonds issued in Hong Kong being sustainable. 

The HKMA will also provide subsidies to prospective issuers and increase outreach efforts. It will continue to promote awareness and participation in the Government Sustainable Bond Programme. 

#6 - Catalyse innovation in sustainable finance: 

Leveraging Hong Kong’s position as both a fintech and sustainable finance hub, the Action Agenda states that the HKMA will encourage and support green innovation in the financial markets to facilitate the channelling of financing to sustainable projects and companies. Incentives will also be provided to prospective issuers of digital green bonds.

IV – Making sustainability more inclusive

#7 - Support high-quality and comprehensive sustainability disclosures: 

The Action Agenda states that the HKMA will work together with other members of the Green and Sustainable Finance Cross Agency Steering Group to make sustainable disclosures more approachable and inclusive. This includes the creation of easy-to-use climate disclosure toolkits for banks and their clients, the use of technology to enhance accessibility and offering training to local industry associations on sustainability disclosures.

#8 - Close talent and knowledge gaps in sustainable finance in the region: 

The Action Agenda states that the HKMA will equip banking practitioners with appropriate sustainable finance knowledge through targeted training programmes. The HKMA will also leverage Hong Kong’s sustainable finance expertise to actively contribute to capacity building in EMDEs, for example, through their partnerships with IFC, GFANZ and the Capacity-building Alliance of Sustainable Investment (CASI).

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The HKMA’s Sustainable Finance Action Agenda is an ambitious and impactful plan aimed at transforming Hong Kong into the sustainable finance hub in Asia and globally. The HKMA’s next focus is on implementing the Action Agenda and providing further guidance and supporting tools for the industry. Through strategic actions and collaborative efforts, the HKMA is looking to lead the financial sector's transition to a sustainable future.