Hong Kong’s status as green finance hub in danger from ‘loopholes’, lack of greenwashing checks: Greenpeace

To achieve its climate goals, Hong Kong should close three “loopholes” in green finance by setting volume targets, restricting fossil fuel financing and enacting a specialised anti-greenwashing law, according to Greenpeace.

While the city boasts of being the top green finance hub in Asia, having arranged over one-third of Asia’s green and sustainable bond issuances, it needs to do more to prevent “greenwashing”, said a joint report by the environmental campaigner, along with climate-action group CarbonCare InnoLab.

When engaging in greenwashing, companies are unable to substantiate their claims by meeting commonly adopted measurement, reporting and verification standards on the environmental benefits of green products, including financial instruments. Left unchecked, this creates disincentives for society to take sustainability seriously.

“Hong Kong lacks an overarching green finance strategy for stakeholders to know how much green finance will be available for the city to achieve its climate goals,” Tom Ng Hon-lam, a Greenpeace campaigner said ahead of the report’s publication on Sunday.

Tom Ng Hon-lam, Greenpeace campaigner, holds a press briefing at GreenPeace’s office in San Po Kong on September 6, 2023. Photo: Jelly Tse

“Hong Kong also has no plan to restrict financing for fossil fuel investment, nor any proposal for specialised anti-greenwashing legislation. These loopholes may hinder Hong Kong’s ability to become Asia’s leading green finance hub.”

He cited policies in some Asian regions as examples of where the city can “catch up”, including Shanghai’s target, unveiled a year ago, to achieve 1.5 trillion yuan (US$208 billion) of green transactions covering bonds, insurance, managed funds, trusts and leasing by next year. Similarly, Guangdong province aims to quadruple the scale of green bond issuance next year, compared with the 2020 level.

Relying on voluntary actions by financial intermediaries and borrowers are insufficient to ensure climate-mitigation results, said CarbonCare researcher Kevin Li.


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“Many financial institutions have issued targets and financing policies to drive their borrowers and investees’ decarbonisation, but it is very difficult to hold them accountable for the implementation and achievement,” he said. “Only policies and regulations can do that.”

In 2020, the government unveiled a goal for Hong Kong to achieve carbon neutrality by 2050. In 2021, it published a detailed climate action plan including an interim target to halve carbon emissions by 2035 from the 2005 level, with a budget of HK$240 billion for climate mitigation and adaptation initiatives.

Asked about the need to set green finance plans and targets, a spokeswoman at the Financial Services and the Treasury Bureau (FSTB) said the government has a multipronged strategy to promote green and sustainable finance in Hong Kong.

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This includes building a green technology ecosystem, innovating in green finance, certifying green attributes, subsidising talent training and enhancing cooperation with regional and international markets.

“[On directing] capital to green projects, the government is leading by example through the issuance of government green bonds … [and] has also pledged to cease using coal for daily electricity generation by 2035,” the spokeswoman said.

Hong Kong has not carried out any high-profile prosecutions or regulatory actions for incidents of greenwashing, even though there is a Trade Descriptions Ordinance that could be used to go after such behaviour, Ng noted.

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In the UK, the Advertising Standards Authority has ordered a number of large companies to withdraw advertisements deemed to be misleading on environmental claims. Similarly, the UK’s Financial Conduct Authority has recently tightened rules requiring that sellers of financial products ensure their sustainability labelling is fair and not misleading.

South Korea is using the legislative process to regulate greenwashing and fine companies judged by the country’s Ministry of Environment to have deceived the public about their green credentials.

To combat greenwashing of financial products in Hong Kong, a cross-agency steering group co-led by the Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA) is developing a road map for adopting international sustainability reporting and assurance standards in Hong Kong, an SFC spokesman said. The FSTB and bourse operator Hong Kong Exchanges and Clearing are also members of the group, along with other government departments and regulators.

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By amending its fund manager code of conduct and issuing a circular on ESG (environment, social, governance) funds in 2021, the SFC has already set regulatory expectations on the management and disclosure of climate-related risks and the naming and disclosures of ESG funds, which are in line with international standards, he added.

“All of these tools are backed by the Securities and Futures Ordinance, which empowers the SFC to take appropriate regulatory actions for compliance breaches,” he said.

An HKMA spokeswoman said the cross-agency group expects to publish in the middle of this year the first phase of a green classification framework, which will provide standards for measuring green performance and guide capital allocation.

Last November, HKMA also issued a circular to banks setting out the expected standards with reference to international practices, for classifying investment products they sell as green or sustainable, she added.

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