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Jenny Lee, Under Secretary General at the Hong Kong Green Finance Association, discusses Hong Kong's commitments to Net-Zero, the role of voluntary carbon trading markets and the importance of educating the finance community on ESG and sustainable finance.
Welcome to the Sustainable Finance Guernsey podcast page.
Guernsey Finance is a joint government and industry initiative tasked with promoting and connecting Guernsey as a leading international finance centre.
Named as one of the Green Finance Guide's top 10 must-listen sustainable finance podcasts, our broadcasts feature news, insights and discussion about green and sustainable finance, and the contribution which Guernsey, as a global leader in green finance, is making in this space.
Rosie 0:03
Welcome to the latest Guernsey Green Finance podcast rated one of the top 10 most useful sustainable finance podcasts by green finance guide. And as part of this podcast series we'll be speaking to and learning from some of the leading global figures in the field. My name is Rosie Allsopp. I am Communications Director at We Are Guernsey. That's the promotional agency for Guernsey's finance industry. Today, I'm delighted to be speaking with Jenny Lee. She's the Under Secretary General at Hong Kong Green Finance Association. Welcome, Jenny.
Jenny 0:46
Rosie. Thank you. Thank you for inviting me to this podcast.
Rosie 0:50
You're most welcome, Jenny. We've loved working together with the Hong Kong green Finance Association through our connection as members of the United Nations Financial Centres for Sustainability, as well as on several of our webinars, including our recent Hong Kong Masterclass, which looked at fund structuring and financing sustainability. I'm looking forward to learning more about Hong Kong's green initiatives during the conversation today. So I'd like to start off by introducing you to our listeners, can you tell us how you ended up working in this area of sustainable finance, and a little bit about your personal backstory, and how you ended up in your present role?
Jenny 1:34
Sure, Rosie, I think before we start, maybe if I could just give a little bit of background first of Hong Kong Green Finance Association, if you don't mind. And just for those who are not familiar with us, we are an NGO in a platform that brings together public and private sector, regulators, policymakers and civil society to position Hong Kong as a leading green and sustainable international financial centre. We have over 150 institutional members who are aligned by industry over eight working groups. In terms of your the question, how I started my career, my journey really began many years ago, I started my career in investment banking, first with JP Morgan in London in equity derivatives, and I was transferred to Hong Kong and then Tokyo to build out a marketing and trading desk. After working in Tokyo for a year I moved back to Hong Kong, with Credit Suisse integrating new products across fixed income and equities. You know, it's exciting time, so lots of new market developments and products in the region. And there was an opportunity to work closely with business leaders, asset managers, investors on strategy implementation and on governance related matters. I was then approached by Goldman to build out the prime brokerage business, mobilising capital from investors to asset managers consulting on financing and business operating models. And I will say that during this time was when I really began my sustainability journey. As a working mum and an active member of the Women's Network, and also a mentor for many of the young graduates. It made me appreciate the responsibility that we have to our future generations to live in a more sustainable way. So I left a successful career in finance after 18 years, with a desire to make a positive impact within the community. But personally, so I took some postgraduate studies, I certified as a health coach, plant based nutritionist, qualified yoga therapy instructor, and a certificate in CFA ESG investing. And then I professionally at Hong Kong green finance Association, which I joined last year, and where I'm able to leverage my experience in finance as a tool to help drive Green Capital to businesses are in the process of transforming their operating models to becoming more greener and sustainable.
Rosie 3:54
Thanks for that great introduction. Now, let's cast our minds back to November 2021, and COP26. During COP26, many countries laid out their ambitions for Net-Zero. Jenny, can you tell me what Hong Kong's net-zero goals are? And what some of the key action plans are to deliver those goals?
Jenny 4:16
Sure. Hong Kong has been on a decarbonisation journey for a number of years now, actually, since the Paris Agreement in 2014. So, you know, for Hong Kong, it's not a new year Prague, new journey. So the environmental Bureau's has been working in close collaboration with the private sector, policymakers and regulators on developing and setting decarbonisation targets and strategies since 2014. And in the 2021 Hong Kong policy address just before COP26, the chief executive in Hong Kong announced the Hong Kong school to be carbon neutral by 2050. Setting aside 240 billion Hong Kong dollars for climate mitigation and adaptation measures in the next 15 to 20 years. And in addition, around that same time the the Climate Action Plan 2050 was updated and released, setting out the vision for Hong Kong's zero emissions, livable cities sustainable development strategy. And within this plan, there are really three key items that stood out for me the first thing reducing and improving building electricity consumption. 67% of the carbon emissions in Hong Kong come from electricity generation, of which 60% are consumed by buildings. So tackling is as a priority is critical. And the environmental Bureau launched the 40 partnership now called the carbon neutrality partnership, but over 60 large organisations in Hong Kong have pledged to strengthen cooperation and coordination, set ambitious targets transparency and timeframe to reduce the overall electricity consumption. The second is on the regulatory front. The Hong Kong cross agency steering group was launched in 2020. And it comprises of the securities Financial Commission Hong Kong exchange, Hong Kong monetary authority, Insurance Authority, Mandatory Provident Fund, the Financial Services Treasury group Bureau and the environmental Bureau to basically promote strategic direction in green and sustainable finance in Hong Kong. They then launched the Centre for green and sustainable finance in 2020, to really help the financial industry digest and adopt some of the new regulations and policies that are coming down the pipeline. And, you know, really utilising the centre to evaluate the financial industry needs. And so with that, they've have a focus in capacity building and data. And so HK Hong Kong Green Finance Association, is a member of the centre and provides a collective voice up for its members. And thirdly, the government launched the green bond program to promote the development of green finance, where the proceeds are used to finance government projects with environmental benefits. Hong Kong has issued over $7 billion dollars worth of green bonds to date, and they can issue up to $200 billion Hong Kong dollars worth under this program. So there's been a strong global institutional, institutional investor interest in this, indicating I think, competence in Hong Kong's credit and economic fundamentals and ability to really harness correct green and sustainable finance. So I would say that those are kind of like some of the year high level action points that Hong Kong is working on at the moment.
Rosie 7:37
Okay. And it's great to hear about all of those commitments and your understanding of the key challenges and the opportunities. So let's talk about how we can unite jurisdictions to combat climate change. I know that the Hong Kong green finance Association held a Race-to-Zero webinar series for COP26, which looked at uniting Asia. Can you tell me some of the highlights from that event?
Jenny 8:03
Sure. On the run up to COP26 Hong Kong green finance associate was an active participant of the UN environmental program, COP26 Financial coalition coordination mechanism the FCCM, and supported the COP26 presidency and the Race-to-Zero by mobilizing the action across the financial sector in Hong Kong to ensure an alignment of financial institutions, climate related objectors at a global, regional and country level. But one of the highlights from this collaboration was the opportunity to work with the Mark Carney Special Envoy portfolio alignment team, and engaging couple of our members in Hong Kong around the region on the latest developments in measuring climate targets and considerations for benchmarking their targets to a net-zero pathway. In addition to working with the portfolio team, we also collaborated with the pika the Partnership for carbon accounting financials, which is gaining momentum in adoption in this region. And it was good to know that we're making a positive contribution by promoting these global standards are to help facilitate a lot of these economies transition to net-zero.
Rosie 9:18
Absolutely. Now, one particularly exciting announcement on the finance specific day for COP26 was the introduction of a new international sustainability standards board, which will develop a comprehensive global baseline of high quality sustainability disclosure standards. Now this has been discussed very widely in Europe, are Hong Kong and Asia also looking to this board for the development of standards, and how important do you think standards are for driving change?
Jenny 9:49
There are currently over 200 sets of taxonomies in the world for reporting assessing climate and sustainability risks. Many are uncoordinated across jurisdictions. So I I think it's really critical that we have standards that are globally consistent across jurisdictions in order to really mobilise green finance across countries and industries where it's most needed, particularly in developing markets, and also to prevent greenwashing. So that there is a defined an understanding from an investor's perspective as to how industries are moving towards net-zero. And also, it's important because it will remove the frictional costs of cross border capital mobilisation. I'm in Hong Kong, the cross agency steering group supports the ISSP and the securities Financial Commission plans to incorporate these standards in Hong Kong companies, audits and listing rules in the coming years. And yeah, this is particularly important for Hong Kong as is the largest banking centre in Asia where 78 out of the top world's 100 banks operate in Hong Kong. And it's also the region regionals regions leading on centre and is leading in the discussions of common standards. So beyond the eye, SSB Hong Kong is also assessing the adoption of the common ground taxonomy listed companies here will be aligned to the TCFD under the fund management Code of Conduct managers will now need to consider climate related risks in their investment and risk management process. So every there's a lot of development in this face. And I think Hong Kong is doing a great job in terms of how it leading this discussion here.
Rosie 11:36
And it's really interesting, I totally agree with your point on consistency with regard to standards. So shortly after COP26, Hong Kong's leader said that the government would be conducting a feasibility study into possibly developing a regional carbon trading center. Can you tell me a bit about why this is important, and also how it's progressing?
Jenny 12:02
In terms of the regional carbon markets, is definitely one of those topics that is very exciting, yet very complicated. Mainland China is committed to a carbon neutrality goal by 2060. And it's also the world's largest emitter of greenhouse gas emissions, and being dedicated to transitioning to a green low emission economy. It's basically also launched about the world's largest carbon trading market last year. So within the carbon trading market that's been launched, and it's limited currently limited to energy companies. But the plan is to also include, like other polluting industries, such as steel, cement, chemicals and aviation, Hong Kong is uniquely placed to play a strategic role to accessing this carbon markets because it is the gateway to mainland China, with its proximity and access to global investors. And also being the largest offshore r&d Centre is really well placed for being to having a voluntary carbon trading markets platform, both regionally in the Greater Bay Area, and also globally. And so that's why there's a lot of excitement here, because, you know, we are at the doorstep of, you know, the world's largest carbon trading market. And in terms of the studies that have been done so far, the cross agency steering group, conducted a feasibility study on developing Hong Kong, its original carbon trading center, and this was really completed at the end of this year. And they will continue to explore how Hong Kong can develop a carbon market and be in be connected into the Greater Bay Area, and placing significant emphasis on ensuring standards, regulations are in place for an orderly market to operate. Because I think what we need to be mindful of is we rush in and set up a carbon trading platform without giving due consideration to harmonisation of standards and regulations across China, Hong Kong and the rest of the world. We could have major exposure to poor market practices. And the other developments that have been going on alongside the feasibility study is by the Hong Kong exchange, where they recently signed an agreement with Juan Joe in August to explore the development of a carbon emissions futures products. And this will provide a hedging tool for men and investors and other international markets in Hong Kong. So with that, together in hand with the carbon trading market feasibility study, you there's still a lot more work to be done in how about laying the right foundations in place, but you know, it's definitely moving in the right direction. And we hope to have more to update, you know, listeners and also the market in the coming months.
Rosie 15:11
That's really interesting to hear your experiences and the discussions that are taking place around the role of carbon pricing and carbon markets. That's something that we in Guernsey are also examining at the moment. We've also identified biodiversity and managing the energy transition as new sustainability themes that we're developing in Guernsey. What are the core themes and ambitions of the Hong Kong green finance Association in supporting Hong Kong and firms based in the region after COP26?
Jenny 15:45
After COP26 And after our annual forum, you know, we came together as a team with an executive committee and working group in and off site at the end of the year. And for Hong Kong green finance Association, our mission still remains to continue to position Hong Kong as a leading green and sustainable international financial center in second to create pathways and roadmaps for Hong Kong to lead in adopting globally consistent, sustainable standards. And thirdly, to strengthen Hong Kong score as a super connector from international markets into Mainland China and around the region. So with these three strategic cover missions, we have aligned this two strategic initiatives to support it. So the first being common ground taxonomy. So as mentioned previously, the market is fragmented. There's a huge global demand to improve the comparability interoperability, and consistency of sustainable finance taxonomies and Hong Kong is best placed to finance the harmonization of taxonomies by adopting this common ground taxonomy, which is jointly produced by the EU and China. By doing so it can then packaged Chinese green assets based on this and sell them to the global markets and vice versa from the EU. So the Hong Kong green finance association will be working with its members private and public sector in Hong Kong, and GBA to promote and raise awareness and to accelerate this adoption. The second area that we'll focus on is really developing education and capacity building programs on environmental, social governance and sustainable finance. In Hong Kong, there is a significant shortage of ESG knowledge and skills. And so rolling out programs to support this will be incredibly important to help address Hong Kong's needs. And we'll do this in partnership with academia and industry in and we'll do this by continued support of sustainable finance events, seminars and webinars. And the third area is really to further enhance the Greater Bay, green finance Alliance integration and collaboration insurance and control Macau and Hong Kong projects. So Hong Kong green finance Association as a founding member of this alliance, will plan to increase engagement with the Greater Bay Area regulators and policymakers to identify opportunities to cooperate on green and sustainable finance focus area, and having covered a mutual recognition of like Hong Kong, like principles and framework. And we'll be looking to hold our Greater Bay Area green finance Alliance annual conference in Hong Kong, combined with our annual Hong Kong green finance conference in September this year. So we're very excited to be able to bring the two together in Hong Kong for the first time.
Rosie 18:56
That does sound exciting. It sounds like you have an awful lot on there at the moment. And you recently held the Hong Kong green finance Association annual forum, and one of the panels was on transition, financing and product innovation. Can you tell us a bit more about Hong Kong's development in transition finance Jenny?
Jenny 19:15
The Hong Kong green finance Association's third annual forum was very much focused on financing a carbon neutrality in Asia, and covered the actions that we needed to lead Asian countries to carbon to a carbon neutrality target. So at the event, we had over 1000 participants join us both physically and virtually. And it was really great to see come at the level of discussions between a lot of our industry expert speakers who are on the panel, and also with many of the leaders in Hong Kong and around the region in the space. Transition finance is definitely one of the hot topics that's been debated, I think over a number of years and because that financial institutions really need to address the transition and financing of industries from brown to green, which is particularly controversial, but also important in emerging market economies. And that's still very much dependent on fossil fuels. So work this year, the transition finance, you know, has a very much a critical role. And, you know, we need a roadmap with consistent standards, disclosures and products to prevent greenwashing. So what is, is it's much more difficult in Europe, in Asia, in it, particularly in Hong Kong, transition finance is still very nascent. And I think one of the reasons being is because of the lack of clarity in terms of the definitions of transition finance and the harmonisation of the taxonomies. Also the experience of practitioners and being the corporates and also in un within the financial industry, and a general agreement on how about the standards and frameworks and accepted by investors. So what we've seen in Hong Kong in the ship last year, we saw an emergence of activity, Bank of China issued the first ACHEMA handbook linked transition bonds. And DBS also issued a transition bond based on its own transition framework. So there still needs to be more education within the industry, we're going to accelerate this flow of capital to transition high carbon emission emitting segments of the economy to meet Hong Kong's 2050 carbon neutrality goals. And one of the things that we'll look to do is to this year work with local corporates and issuers to really raise the awareness of the different types of financial pathways that are out there the global standards that are already available, for example, from the climate bonds, initiative, ACHEMA, work with a lot of the experienced service providers and identify an agreeable framework that really satisfies institutional investors demand but tailoring it to the Hong Kong assets at class, and also reaching out and building that out into the Greater Bay area. One of the research that we have done a year ago was on climate finance transition pathways that highlights these principles, standards and frameworks. And this will be, you know, a good reference and starting point for companies that will look to us as we go into this year. And really raising that awareness around transition finance to help accelerate a lot of these I'm hard to be industries to transition to net-zero.
Rosie 22:49
That sounds like an enormously important piece of work. The United Nations financial centres for sustainability, which Guernsey and Hong Kong are both members have highlighted that upskilling and education on green and sustainable finance is a priority. Jenny, what are your experiences in upskilling? And education? And how can we develop those practical sustainability skills within the finance community?
Jenny 23:17
We have been since we're really focused on part of our problem is educating and capacity building. So that's really been a key focus for us across our eight working groups. And, you know, we've worked extensively in the pasture in also promoting green finance principles and best practices to enhance, you know, Hong Kong position and also its talent, and is one of the most dynamic green finance associations in the region. We were involved in over 60 sustainable industry capacity building events this year, which was up what that me in 2021, which was 100%, from the previous year, to really address the environmental, social and governance talent gap needs in Hong Kong. In addition to working with the industry and the corporates, you know, we continue to work very closely with the government, the policymakers and regulatory bodies and the private sector, in really engaging them in terms of the understanding of the new developments and standards, that you know, we are also seeing working with associations like yourself with the COP26, the financial centers for sustainability and really bringing those to Hong Kong from a thought leadership perspective. For this year, again, we have a lot of initiatives and, you know, big goals and aspirations and ambition. So we are a lso planning on launching a Hong Kong green finance Association training program in partnership with academic institutions in the coming months. to really help upskill and train the corporates, the local SMEs and financial professionals in Hong Kong, and also looking at how we can really tap into the youth as well to bring about the youth up the curve through a sustainable talent program. So you know, this will be the first holistic, comprehensive, like fast tracking of green and sustainable training that will be targeted very much at the financial professionals. So, again, lots to do so watch the space, and we look forward to giving you an update on this the next time we speak.
Rosie 25:36
Oh, definitely, I very much look forward to hearing about it. Unfortunately, that's all that we have time for today. But I'd like to say thank you to my guest, Jenny Lee for her time and insights. Jenny, I particularly enjoyed hearing your thoughts about carbon markets and the role that they've got to play in the global transition process and also the development of those climate transition pathways that you mentioned. I'd like to also thank you for listening. And if you'd like to know more, we have quite a back catalogue of interviews and panel discussions on the Guernsey green finance podcast channel. You can check them out by searching for Guernsey Green Finance wherever you get your podcasts. If you enjoyed today's episode, please leave us a review or comment. We love receiving your feedback. You can also find us at Guernseygreenfinance.org and weareguernsey.com. You can interact with us on Twitter at @gsygreenfinance and at @weareguernsey. You can hear more relating to news and developments coming out of guernseys finance industry. You can check out the We Are Guernsey podcast on your preferred platform. And we also have links to Jenny and the Hong Kong green finance Association's social media in our show notes. So check those out to hear more from them. And we'll be back soon with another edition of the Guernsey Green Finance podcast.
Transcribed by https://otter.ai