Subject: financial affairs, environmental projects, green bonds, green financial products

  • In recent years, green finance has emerged and gained importance amid the global commitments to build a green and sustainable world economy. According to a dedicated study group established by the Group of Twenty ("G20"), the Green Finance Study Group ("GFSG"), "green finance can be understood as financing of investments that provide environmental benefits in the broader context of environmentally sustainable development". Apart from bringing environmental benefits, green finance also helps promote technological innovation and facilitate growth of green industries, while creating potential business opportunities for the financial sector.
  • It is estimated that US$6.9 trillion (HK$54 trillion) of annual investment in green, low-carbon and climate-resilient infrastructures would be needed globally during the period from 2016 to 2030.1Legend symbol denoting See OECD (2017). The enormous amount of funding implies the need to mobilize the private capital, which points to the business potential of the market of green finance. In her 2017 Policy Address delivered on 11 October 2017, the Chief Executive indicated that the Government would take the lead in arranging the issuance of a green bond in the 2018-2019 financial year, and promote the establishment of green bond certification schemes that meet international standards by local entities.
  • This issue of Essentials highlights the global development of the green finance market, with special reference to the work of GFSG and the experience of the United Kingdom ("UK") (a global centre for green finance). It is followed by a discussion of the opportunities that Hong Kong might benefit when developing green finance.

Global development of green finance market

G20's Green Finance Study Group

Development of green finance in the United Kingdom

  • When it comes to the issuance of bonds for sustainable projects, the global financial centre, London, is renowned for its green bond market with the first green bond listed on the London Stock Exchange back in 2009. In fact, the London Stock Exchange has been active in promoting green finance. Specifically, it launched in 2015 a range of dedicated green bond segments for investors. Issuers seeking to list bonds on the green bond segments are required to provide the London Stock Exchange with an external review document prepared by an independent third party verifying the "green" nature of the bonds.10Legend symbol denoting The external review could take the form of consultant's review, second opinion, verification, third-party certification, or green bond rating. As at April 2017, there were 42 green bonds listed on the London Stock Exchange in seven different currencies.11Legend symbol denoting See London Stock Exchange (2017). Besides, the London Stock Exchange also supports the voluntary green bond principles developed by the International Capital Market Association by acting as an observer.
  • In addition, the UK has recently introduced various initiatives to boost the development of green finance. These initiatives include: (a) launching the "Green Finance Initiative" through the City of London to promote the UK as a global centre for green finance; (b) setting up the Green Finance Taskforce, with members from senior leaders of the financial sector to accelerate investment in the transition to a low carbon economy, thereby creating high-value jobs and opportunities for UK businesses; (c) working with the British Standards Institution, a recognized UK National Standards Body, to develop a set of green standards which provide clarity to financial institutions over the credentials of green financial products; and (d) planning to work with mortgage lenders to support the development of green mortgage products associated with, for example, more energy efficient properties.12Legend symbol denoting See City of London (2016b) and GOV.UK (2017).

Development of green finance in Hong Kong

Concluding remarks

  • Global commitments to combat climate change and other environmental problems hint at a number of green projects in the pipeline, which will require funding on a massive scale. However, public finance will only provide a small fraction of the financing needs. To mobilize more private capital, developing green finance has been emerging. In recent years, various economies have made efforts to accelerate green investment by, for example, issuing long-term green bonds and developing standards or guidelines to strengthen transparency. At present, Hong Kong does not have a targeted strategy on the development of green finance. However, it is believed that with its strength in the financial services sector, Hong Kong has the potential to grow the green finance market by offering a broader range of green investment products and acting as a hub for raising green capital to meet the needs of both green enterprises and investors.

Prepared by Tiffany NG
Research Office
Information Services Division
Legislative Council Secretariat
27 November 2017


1.See OECD (2017).

2.See United Nations Framework Convention on Climate Change (2009).

3.The United States has officially notified the United Nations of its intention to withdraw from the Paris Agreement on 4 August 2017.

4.See OECD (2017).

5.GFSG was co-chaired by the People's Bank of China and the Bank of England in 2016 under China's Presidency, which continued into 2017 under the Germany's Presidency.

6.See G20 Green Finance Study Group (2016) and UNEP (2016).

7.Maturity mismatch is the result of inadequate supply of long-term funding to meet the funding demand for long-term projects. According to G20 Green Finance Study Group (2016), some banks lack the ability or interest in extending long-term loans, due partly to the relatively short maturity on the liability side of their balance sheets. On the other hand, many green projects are long-term in nature.

8.According to European Commission (2017), "green washing" refers to a company or organization spending more time and money claiming to be "green" through advertising and marketing than actually implementing business practices that minimize environmental impact.

9.The five green finance pilot zones are Guangdong, Guizhou, Jiangxi and Zhejiang provinces, as well as the Xinjiang Uygur autonomous region.

10.The external review could take the form of consultant's review, second opinion, verification, third-party certification, or green bond rating.

11.See London Stock Exchange (2017).

12.See City of London (2016b) and GOV.UK (2017).

13.See Financial Services Development Council (2016).

14.See Financial Services Development Council (2016), Reuters (2016), and China Daily Asia (2016).

15.Faced with extensive environmental pollution challenges, the Mainland authorities have in recent years made committed efforts to improve the environment by developing green infrastructures and introducing standards and regulation. It is estimated that during the National 13th Five-Year Plan period (2016-2020), an annual investment of at least RMB 2 trillion (HK$2.33 trillion) would be needed to finance the green industries. Public sources are expected to account for no more than 15% of the funding required, and the ensuing funding gap hints at business opportunities for Hong Kong.

16.According to the Government, the Hong Kong Quality Assurance Agency is working on a green finance certification scheme. A Technical Committee has been formed to deliberate technical details of the scheme. See Gov.HK (2017).


1.China Climate Change Info - Net. (2016) 'Carbon-neutral' G20 summit shows China's commitment to green growth.

2.China Daily Asia. (2016) Call for HK to become green finance hub amid mainland push.

3.China Daily. (2017) Green finance - HK primes the pump.

4.City of London. (2016a) City of London Corporation welcomes G20's commitment to green finance and announces Green Finance Submit 2017.

5.City of London. (2016b) Green Finance Initiative - Globalising Green Finance: The UK as an International Hub.

6.European Commission. (2017) Financing Sustainability - Triggering Investments for the Clean Economy. EPSC Strategic Notes.

7.Financial Services Development Council. (2016) Hong Kong as a Regional Green Finance Hub.

8.G20 Green Finance Study Group. (2016) G20 Green Finance Synthesis Report.

9.G20 Green Finance Study Group. (2017) G20 Green Finance Synthesis Report.

10.GOV.HK. (2017) LCQ5: Development of green finance. 8 November 2017.

11.GOV.UK. (2017) Green finance. 18 September 2017.

12.Green Finance Initiative. (2017) Official website.

13.Hong Kong Government budgets, various issues.

14.London Stock Exchange. (2017) Official website.

15.OECD. (2017) Investing in Climate, Investing in Growth - A Synthesis.

16.Reuters. (2016) Hong Kong could be a black belt in green bonds.

17.State Council of the People's Republic of China. (2016) China pushes green finance onto G20 agenda.

18.State Council of the People's Republic of China. (2017) China sets up pilot zones to boost green finance.

19.The People's Bank of China. (2015) Establishing China's Green Financial System. Background Paper B: International Experience of Green Finance.

20.UNEP. (2016) Greening the Banking System - Taking Stock of G20 Green Banking Market Practice. Inquiry Working Paper (16/12).

21.United Nations Framework Convention on Climate Change. (2009) Copenhagen Climate Change Conference - December 2009.

Essentials are compiled for Members and Committees of the Legislative Council. They are not legal or other professional advice and shall not be relied on as such. Essentials are subject to copyright owned by The Legislative Council Commission (The Commission). The Commission permits accurate reproduction of Essentials for non-commercial use in a manner not adversely affecting the Legislative Council, provided that acknowledgement is made stating the Research Office of the Legislative Council Secretariat as the source and one copy of the reproduction is sent to the Legislative Council Library. The paper number of this issue of Essentials is ISE02/17-18.