Strong government intervention and a willing market is turning Hong Kong into a global sustainable finance hub, but it is far from reaching its full potential. 

Hong Kong is no stranger to the effects of climate change. Its temperature increased at a rate of 0.28 degrees centigrade per decade during the period of 1993 to 2022 while, on average, the mean sea level at Victoria Harbour rose at a rate of 32 millimetres per decade during 1954-2022. In addition, in recent years the city have been experiencing more frequent and intense weather events, including a “once in 500 years” rainstorm in September last year.

To build Hong Kong into a city of the future and support China’s goals under the Paris Agreement, the Special Administrative Region’s government has been leveraging its status as a financial giant to push its green finance initiative. “To support the global action on climate change, the financial sector has a key role to play. It can green the world by directing capital flows towards sustainable investments and away from high-emitting industries, hence driving the transition to a sustainable future,” the Hong Kong Monetary Authority said in a May 2023 proposal for a prototype green classification framework for adoption in the local market.

And the government has been backing up its green resolve with increasingly supportive measures. In November 2018, it launched the Government Green Bond Program, whose limit was increased to around $25 billion (HK$200 billion) in 2021. The government has also launched green bond frameworks in 2019 and in 2022. Hong Kong launched the world’s first ‘Global Medium Term Note Programme’ dedicated to green bond issuances by a government in 2021. in 2022, the government launched the Retail Green Bond with an issue size of $2.6 billion, making it the largest green retail bond issuance at the time. In 2023, it launched triple-currency green bonds raising $5.75 billion, making it Asia’s largest ESG bond issuance till date. As of July 2023, the government has successfully issued close to $22 billion (HK$170 billion) worth of green bonds under the GGBP. And in February 2024, it issued digital green bonds of around HK$6 billion denominated in Hong Kong dollars, Chinese yuan, U.S. dollars and euro. Allen & Overy, Ashurst and Linklaters were the firms advising on the issuance.


“There are various factors that can support Hong Kong’s development into a green finance hub. There is strong commitment and support from the Hong Kong government to develop Hong Kong into an international centre for green technology and finance. Further, Hong Kong has close ties with Mainland China, and could scale access to international finance for Mainland China.”
— Dion Yu, Mayer Brown


This government-backed robust growth is making Hong Kong a sustainable finance hub in Asia and the globe, even as macroeconomic challenges are impacting the Hong Kong market, says Mayer Brown banking and finance partner Dion Yu.

“There are various factors that can support Hong Kong’s development into a green finance hub. There is strong commitment and support from the Hong Kong government to develop Hong Kong into an international centre for green technology and finance. Further, Hong Kong has close ties with Mainland China, and could scale access to international finance for Mainland China. For example, the Stock Exchange of Hong Kong Limited has been a major venue for Mainland China’s offshore green bond listings,” notes Yu.

Despite challenging macroeconomic conditions for international bond market in recent years, Hong Kong was the largest centre for arranging Asian international green and sustainable bond issuances in 2022, says Norton Rose Fulbright counsel Alvin Wong. “A strong regulatory and supervisory framework, coupled with Hong Kong’s active participation in the development of regional and international green and sustainability initiatives, has cemented Hong Kong’s position as the leading sustainable financial hub in Asia,” he adds.


This government-friendly environment is leading to increased sustainability-focused financing in the market, says Angie Chan, also a banking and finance partner with Mayer Brown.

“Sustainable finance market is becoming more prevalent in the Hong Kong market. We have seen more bor-rowers borrowing green finance (such as amending existing documentation to introduce green finance elements). On the other hand, there is also increased scrutiny by lenders on the quality of sustainable finance products,” says Chan. There is also a proliferation of ESG loans across bank lending and private credit, says Wong. “Most bank lending nowadays are structured as ESG loans. Banks would (more likely than not) offer to refinance any maturing loan that was not an ESG loan as an ESG loan. We have also begun to see private credit funds structuring their private credit lending as ESG loans to meet their investors’ ESG requirements.”

There as also been a change in the choice of key performance indicators (KPIs) in the sustainable loan market. While traditionally, environment was the most selected KPI ahead of S and G, “we have seen an uptick in the selection of social and governance KPIs in the Asia Pacific sustainable loan market,” explains Wong.

For example, the Hong Kong Mortgage Corporation launched the largest social bond issuance in Asia in Septem-ber 2023, the proceeds of which will be used for financing or refinancing a scheme to alleviate the cash flow pres-sure of small and medium enterprises in Hong Kong during the pandemic, Chan of Mayer Brown points out.

Blue bonds are another new category of sustainability-linked financial products that are gaining popularity. “Another notable issuance was by Fujian Zhanglong Group, which successfully issued US$500 million blue bonds in Hong Kong in November 2023. This is the first offshore blue bond and the largest offshore USD bond issued by a local non-financial state-owned enterprise in Mainland China in 2023,” Chan explains. The sustainable market, despite all its success, is yet to make strong inroads in the small and medium-size enterprises (SMEs) market which constitute 989.5 percent of the companies registered in Hong Kong.

“The ecosystem for sustainable finance for SMEs is still maturing. The government has lowered the minimum loan size threshold for external review subsidy under the Green and Sustainable Finance Grant Scheme from HK$200 million to HK$100 million, which is an important step,” Wong explains.

“The Climate and Environmental Risk Questionnaire for non-listed companies and SMEs developed by CASG and CDP (a non-profit organisation) has also enhanced climate data availability and sustainability reporting for non-listed corporates and SMEs in Hong Kong,” he adds.

Chan argues that sustainable finance can reach the SME market through increasing requirements on listed and international corporations, which may require their suppliers (which may be SMEs) to report on sustainability matters.


With an ever-increasing regulatory regime supporting strong market growth for sustainable finance, lawyers in the arena are expected by clients to go beyond the simple knowledge of compliance, documentation, and regulations. “Finance lawyers are expected to not only be well-informed of the current state of law in relation to sustainable finance, but also to have a grasp of cur-ent market trends which will shape the law in the future,” Yu of Mayer Brown says.

The goal for the authorities has always been to set up a global finance hub in Hong Kong. To this end, the Hong Kong Monetary Authority (HKMA) has been working on creating a local “green taxonomy” framework for classifying economic activities considered environmentally friendly or sustainable, and the next step will be broadening that to include transition financing.

The Green and Sustainable Finance Cross-Agency Steering Group, a body established in May 2020 by financial regulators in Hong Kong such as the Securities and Futures Commission and the HKMA, has identified the development of transition finance is a key initiative for 2024.

“It is expected that there will be further developments of the local green classification framework as well as tools and technology that support data collection and analysis,” Wong says.

“With the sustained enthusiasm of industry players and the support from the government and regulators, we expect the sustainable finance market in Hong Kong to remain robust in the years to come,” Chan adds.



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