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Hong Kong financial regulators launch plan for green finance

Financial institutions including banks, asset managers, insurance companies and pension trustees, will be subject to enhanced climate-related disclosure obligations in Hong Kong, regulators have announced.

The enhanced disclosure requirements will build on standards set by the Task Force on Climate-related Disclosures (TCFD), a body created by the Financial Stability Board to publish principles to inform investors of climate-related financial risk. The new requirements were outlined by the Green and Sustainable Finance Cross-Agency Steering Group (Steering Group) as part of a new plan to bolster green finance in Hong Kong.

Listed companies whose financial years commenced on 1 July 2020 or after are already subject to mandatory climate-related disclosure obligations in Hong Kong, and the Steering Group confirmed it would broaden the scope of those mandatory obligations to a wider number of businesses by 2025 in addition to implementing enhanced disclosure requirements for financial institutions.

To support the new disclosure requirements, the Steering Group has said that, by the middle of 2021, it aims to adopt a common green finance taxonomy that is being developed by China and the European Union (EU).

The group also set out measures in relation to climate-related financial risk management, capacity building in financial services, and exploring initiatives to facilitate capital flows towards green and sustainable causes. The group wants Hong Kong to develop into a green finance centre in the Greater Bay Area, and has also promoted regional and international collaboration.

John Yeap of Pinsent Masons, the firm behind Out-Law, said, "Hong Kong has a tremendous opportunity to play a key role in advancing green finance, given its strategic location within greater China and its access to international capital. These steps announced by the steering group can be viewed as important initial steps towards providing a verifiable and auditable framework which would be central to successfully implementing green financing. " 

The Steering Group was established by the Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC) in May, aiming to establish a more coordinated approach to climate and environmental risks management in the financial sector and to accelerate the growth of green and sustainable finance in Hong Kong.

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