Sustainable Finance Law: Hong Kong

The sustainable finance framework for the Hong Kong market is voluntary. While there are no specific regulatory or legal requirements for sustainable finance, several financial regulators in Hong Kong, such as the Hong Kong Monetary Authority (HKMA), the Securities and Futures Commission (SFC) and The Stock Exchange of Hong Kong Limited (HKEX), have been spearheading support for sustainable finance and have continued to issue guidance on related topics such as ESG disclosure requirements and climate-related risk management.

At the regional level, in February 2023, the Asia Pacific Loan Market Association (APLMA), jointly with the Loan Market Association (LMA) and the Loan Syndications and Trading Association (LSTA), issued updates to the principles and guidance on three types of sustainable loans: green loans, sustainability-linked loans (SLLs) and social loans. The updates provide the latest industry standards for sustainable lending within the Asia Pacific region.

Despite a challenging macroeconomic environment with interest rate volatility, investors' demand for sustainable finance products remains robust. In the Asia-Pacific region excluding Japan, green and sustainability-related bond issuances totalled US$83.2 billion as at 16 June 2023, compared with US$137.3 billion for the whole of the past year. This can be credited to the support and interest from key stakeholders including companies, financial institutions, regulators and the Hong Kong government.

Hong Kong aims to develop into a green financial hub in the region. In line with this ambition, the Hong Kong government has taken a lead role in sustainable finance with the issuance of green bonds through the Government Green Bond Programme. See Section II for details. Further, various regulators have published strategic frameworks and created working groups to encourage the development of a sustainable finance ecosystem in Hong Kong. The relevant frameworks and initiatives are described below.

Hong Kong companies have been involved in sizable sustainable finance deals as well. In June 2022, a Hong Kong property developer signed the largest SLL in the real estate sector in Hong Kong for HK$20.7 billion. Further, well-known Hong Kong companies and public entities recognise the importance of sustainable finance and have developed sustainable finance frameworks. The framework for sustainability reporting and disclosure standards is described in Section V.

Financial institutions continue to encourage the development of sustainable finance. For example, HSBC boosted the size of its Greater Bay Sustainability Fund to US$9 million from its initial outlay in May 2022 of US$5 billion to fund projects within the Greater Bay Area region that aim to reduce carbon emissions.

With the active involvement of key players in the sustainable finance market, the Hong Kong green finance market has encouraged mainland Chinese firms to access offshore sustainable financing. The HKEX remained the largest venue for China's offshore green bond listings in 2022, taking up 43 per cent of the offshore volume from mainland China-domiciled issuers.

The above summary reflects the prevailing positive attitude in the market towards sustainable finance, which has continued from the previous year.

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