LCQ5: Promoting environmental, social and governance development

     Following is a question by the Hon Benson Luk and a reply by the Acting Secretary for Financial Services and the Treasury, Mr Joseph Chan, in the Legislative Council today (November 30):

Question:

It is learnt that environmental, social and governance (ESG) have become important new indicators adopted worldwide for measuring enterprises' performances in their business operations. Since 2016, the Stock Exchange of Hong Kong Limited has also required Hong Kong's listed companies to disclose their ESG reports. However, the ESG reporting approaches and indicators adopted by Hong Kong enterprises are not the same, and lack unified objective assessment standards. Furthermore, relevant authorities around the world are establishing their own ESG assessment standards and certification systems, as well as striving for more widespread recognition in this respect, so as to become an international ESG investment hub. In this connection, will the Government inform this Council:

(1) of the plans for the coming three years put in place by the Government to develop Hong Kong into the ESG investment hub of Asia, to establish unified ESG standards, and to mobilise various sectors in formulating ESG standards for their respective industries;

(2) to tie in with the aforesaid plans, what measures the Government has put in place to nurture the ESG-related talents needed by various sectors; and

(3) whether the Government will set a good example by gradually introducing ESG operation concepts to various government departments and public bodies, as well as formulating ESG-related performance indicators; if so, of the details; if not, the reasons for that?

Reply:

President,

Thanks for the Hon Benson Luk's question. In consultation with the relevant Bureaux and financial regulators, my reply to the three parts of the question is as follows:

(1) The Government has been working in concerted efforts with the financial regulators and the industry in taking a multi-pronged strategy to promote green and sustainable finance in Hong Kong. For standard setting, the progress of major measures is as follows:

Climate-related disclosure reporting framework for listed companies: The Green and Sustainable Finance Cross-Agency Steering Group (Steering Group) requires relevant sectors to make climate-related disclosures in accordance with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) by 2025. The Steering Group also supports the International Sustainability Standards Board (ISSB) to, on the basis of TCFD's efforts, develop a set of more detailed and global sustainability reporting standard. The Securities and Futures Commission (SFC) is working with the Stock Exchange of Hong Kong Limited to develop a climate reporting framework for listed companies in Hong Kong, which will align with the global baseline being developed by ISSB and take into account companies' capabilities and readiness.

Taxonomy: To increase transparency across the financial markets and enable consistent policy making on green finance, the Steering Group will, with the aim of aligning with the Common Ground Taxonomy jointly formulated by the Mainland and the European Union, explore developing a green classification framework for adoption in the local market. The Steering Group has been engaging with the industry and other relevant stakeholders to explore in depth the features and challenges of a local green classification framework, and will develop proposals on the structure and core elements of the framework for further consultation.

The Hong Kong Monetary Authority (HKMA), the SFC, the Insurance Authority and the Mandatory Provident Fund Schemes Authority have formulated regulatory measures to require respective sectors to take into account climate risks in their businesses.

(2) The Government is committed to strengthening the nurturing of local Environmental, Social and Governance (ESG)-related talents, with $200 million earmarked for launching a three-year Pilot Green and Sustainable Finance Capacity Building Support Scheme to provide subsidies for the training and acquisition of relevant professional qualifications in sustainable finance. The Scheme has started accepting applications for registration as eligible programmes since end-October 2022 and is expected to be officially launched within this year. The eligibility requirements and procedures for individuals to make subsidy applications, the first batch of eligible programmes and other details will be published then.

The Government and financial regulators have also been working closely with the industry and the academia to take forward various initiatives at the individual and institutional levels to enhance capacity building in green and sustainable finance, which include launching the Green and Sustainable Finance Repositories on training, data and internship opportunities, the Sustainable Finance Internship Initiative, etc. through the Steering Group.

(3) To reduce the total carbon emissions by 50 per cent before 2035 (from the 2005 level) in order to achieve the goal of carbon neutrality before 2050, "The Chief Executive's 2022 Policy Address" announced a series of decarbonisation efforts in relation to public facilities and services, which include improving the overall energy performance of government buildings and infrastructure by more than 6 per cent by 2024-25, accelerating the incorporation of district cooling systems in New Development Areas (including the Northern Metropolis), providing an additional 7 000 parking spaces with electric vehicle chargers in government premises in the coming three years, launching a trial scheme on food waste collection in public rental housing within this year, etc.

The Government has implemented a green procurement policy that requires departments to, under cost-effective conditions, procure products and services in accordance with the green product standards promulgated by the Environment and Ecology Bureau in consultation with relevant departments, purchase green products and avoid the use of disposable items, thereby actively promoting carbon reduction, waste reduction and a circular economy. The Government is committed to striking a balance between development and conservation in the implementation of large-scale construction projects. We promote low-carbon construction, emission reduction and green procurement, including the use of recycled and environmentally friendly construction materials. The Government has also put in place a mechanism to score technical proposals for environmental protection, including greening and carbon emissions, digital operation, and innovative concepts, in the tendering process.

The Government Green Bond Programme has funded a total of 45 eligible projects so far, which help improve the environment and promote the development of Hong Kong as a more sustainable and liveable city. The issuance of government green bonds will be expanded, with a target of increasing the total issuance amount by more than five times within the five years from 2021-22 as compared with the pre-2021-22 situation.

For the Exchange Fund, the HKMA has adopted a guiding principle that priority will generally be given to ESG investments if the long-term return is comparable to other investments on a risk-adjusted basis. The HKMA has integrated ESG factors into the public and private market investment process, and is continuously increasing ESG and green investments under the guiding principle.

The Government will continue to take forward the above work and capitalise on Hong Kong's promising prospect in the development of green and sustainable finance, with a view to moving towards the goal of carbon neutrality before 2050.

Thank you, President.