Transition finance, defined as loans and bonds aiding companies in transforming their carbon-intensive operations to align with global green goals, is a key initiative for the Green and Sustainable Finance Cross-Agency Steering Group in Hong Kong. Spearheaded by financial regulators such as the Securities and Futures Commission and the HKMA, this body aims to catalyze the growth of sustainable finance. Developing a taxonomy for transition financing is crucial for providing banks with a standardized framework for issuing such instruments.
HKMA Deputy CEO Darryl Chan emphasized the challenges in formulating a transition taxonomy, citing the global efforts in this domain by regions like the EU, ASEAN, and mainland China. In China, the Shanghai government has already published a transition taxonomy covering various sectors like water transport and chemical manufacturing. The aim is to create a taxonomy that is aligned with international standards to ensure consistency and comparability across different jurisdictions, facilitating smoother transitions towards a net-zero economy.
Furthermore, Hong Kong, a hub for sustainable finance, is gearing up to establish a taxonomy that will encompass sectors such as electricity generation, transport, water management, and construction. With plans to roll out this framework initially for banks and later for other financial sectors, the city aims to boost its standing as a global green finance center. As part of the government’s Green Week initiatives, the HKMA is collaborating with international entities like the International Finance Corporation to promote sustainable finance and support the development of green projects through initiatives like green bond issuances.
