On 1 December 2020, the Hong Kong Stock Exchange (HKEX) launched the Sustainable and Green Exchange (STAGE), a first-of-its-kind investment product platform supporting sustainable and green finance in Asia. The centre of the platform is an online Product Repository that initially hosts information on 29 sustainability-themed products including offering circulars, bond framework documents and external certification documents. A comprehensive Resources Library supplements this offering with case studies, webinars, guidance materials, research papers and other online resources related to sustainable finance. According to the HKEX's Head of Markets, the platform "will connect market participants, issuers and investors, providing a one-stop shop for reliable green data and products, helping to drive growth potential, transparency and access to Asia’s exciting green and sustainable financial market.”
HKEX announced the platform in June 2020 as part of its response to the dynamic and evolving sustainability landscape in Asia. For more information about the objectives of this new platform, please see our Legal Update on that announcement here.
This Legal Update showcases the possibilities that STAGE, now operational, presents for issuers, investors and other market participants.
What Can STAGE Do for Issuers?
The Product Repository is perhaps the most beneficial feature for issuers, who can apply to have their sustainability, green and social products included in this new online repository. Products listed on the HKEX Main Board are eligible for inclusion, provided issuers also:
- Designate the classification of the bonds to be displayed (i.e., sustainability, green or social);
- State the international standards or principles that the bonds adhere to;
- Submit a copy of the bond framework, which usually includes information on the use of proceeds, project selection, management of proceeds and reporting process;
- Submit a copy of the relevant external review of the bonds; and
- Submit, on an annual basis, a post-issuance report on allocation of proceeds and expected impacts, if any, during the tenor of the bonds.
Importantly, these requirements comprise additional voluntary disclosures above and beyond the listing rules of the HKEX, including use of proceeds reports and annual post-issuance reports. This additional level of transparency can generate increased investor interest and trust in an issuer's sustainability-related products, leading to more efficient fundraising processes. The repository itself can also be used as a benchmark for the terms of future offerings, allowing issuers to gauge the competitiveness of their own products. At a minimum, products included in the new scheme will benefit from the imprimatur of the first sustainable and green exchange from one of the world's leading stock exchanges.
What Can STAGE Do for Investors?
Investors can benefit from both the Product Repository and Resources Library. The Product Repository is a reliable, accessible platform for quickly obtaining information on a variety of products ranging from the offering circulars for green and social bonds to the investment and exclusion policies of ESG-related equity indices. The comprehensive information in this database may be useful for investors who are just beginning to consider ESG factors as it includes examples of the various types of products currently available in the market, which may help to define the contours of an initial ESG investment strategy. More seasoned ESG investors may find the Product Repository useful to easily compare and contrast the features of multiple products within and across asset classes.
Similarly, the Resources Library is particularly useful for investors who are considering or beginning to integrate ESG principles into their investment processes. The sustainable investing landscape is currently marked by a plethora of standards and guidance materials from a wide range of sources, and it can be difficult for investors to determine where to begin. In this context, the inclusion of a range of materials from sources endorsed by the HKEX is a welcome guidepost for investors looking for reliable information to start understanding the complex world of ESG and sustainable investing. For more information about ESG standards, please see our Legal Updates on recent developments from the UN Development Programme, World Economic Forum and CFA Institute.
What Can STAGE Do for Other Market Participants?
Other market participants, and particularly those with less ESG experience, may find STAGE primarily useful as a capacity-building tool. Here, STAGE can be part of the first step of an organisation's sustainability journey, in which the Product Repository can illustrate real, practical examples of successful sustainable investment products. Importantly, the materials in the Resources Library can provide the background that is critical to understanding the features and merits of these products. This information should prove useful for a range of organisations, however they choose to integrate sustainability concepts. For example, organisations can look to green bond framework documents from issuers in their own industry to better understand the activities and projects that the market considers "green" or "sustainable", whether or not they are contemplating a green bond issuance.
Currently, ESG- and sustainability related capacity building is only one facet of a broader, effective governance strategy, but it may soon be required in some contexts. For example, the Thai Securities and Exchange Commission is currently consulting on mandatory ESG training requirements for certain capital markets licensees, while climate-related risk management regimes in the UK and Hong Kong encourage capacity building in the field of climate change, specifically. As similar capacity-building requirements take hold around the world, platforms like STAGE will prove to be valuable sources of reliable information to aid compliance efforts.
It is clear that STAGE is already a useful tool for issuers, investors and a variety of other market participants. As more products are added to the Product Repository and more resources are added to the Resources Library, the platform should become an even more powerful source of information in the rapidly evolving field of sustainable and green finance.
To learn more about sustainable finance and the ESG landscape across the Asia-Pacific region, we invite you to read our comprehensive article, "Private Equity for the Public Interest: The Evolution of ESG in Asia and Considerations for Asset Managers and Investors".