Hong Kong to launch subsidy scheme for green fintech start-ups to bolster sustainability data acumen, official says

The Hong Kong government will soon launch a subsidy scheme for start-ups with expertise in the collection, analysis and reporting of sustainability data as part of an effort to connect the city's financial acumen with a growing fintech field and support the climate transition, according to a senior official.

"We are working to combine our advantages in financial technology with green finance, aimed at building Hong Kong into a green fintech hub," Salina Yan Mei-mei, permanent secretary (financial services) of the Financial Services and the Treasury Bureau, said at the Asian Financial Forum on Thursday.

Hong Kong has around 1,000 fintech companies that provide technological solutions on environment, social and governance (ESG) analytics, ESG reporting preparation and related subjects, Yan said.

Do you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team.

"To practically support these budding companies ... we are going to launch a proof-of-concept subsidy scheme for green fintech companies in the first half of this year, with the objective of providing early-stage funding for pre-commercial companies to help expand the green fintech ecosystem in Hong Kong," she said.

Machine learning, internet-of-things technology, digital sensors and other digital technologies can greatly enhance the efficiency, timeliness and accuracy of the collection, analysis and reporting of corporate climate and ESG data - while also reducing the costs incurred.

Such data includes companies' energy and water consumption, greenhouse-gas emissions and waste generation.

Other green fintech companies provide tools and services for climate-related risk assessment. Such tools are especially useful to small and medium-sized companies that have limited resources to implement climate-transition measures, Yan noted.

Green fintech is one of the government's top three priorities for this year for enhancing Hong Kong's strength in green finance, Yan said. The other two are corporate sustainability disclosures and climate-transition finance.

Hong Kong is already one of the world's biggest green finance hubs. Issuance of green and sustainable bonds and loans arranged by the city's financial intermediaries rose from US$11 billion in 2020 to more than US$80 billion in 2022, accounting for a third of the total volume in Asia.

Government support played a role in the growth. By the middle of this month, the government's green bond and loan borrowers' financial assistance scheme has granted HK$210 million (US$27 million) to pay for the issuance-related expenses of 340 green and sustainable debt instruments worth US$100 billion issued in Hong Kong, Yan said.

On sustainability disclosures, the bureau is preparing a road map for adopting the guidelines published by the International Sustainability Standards Board last year, Yan said. This involves reporting standards, disclosure quality assurance, technology adoption and the building of a talent pool.

Bourse operator Hong Kong Exchanges and Clearing has decided to start requiring listed companies to adhere to upgraded climate change-related disclosures from next year, after consulting the market last year.

On transition finance, which refers to financing that helps so-called hard-to-abate sectors transition to low-carbon operations, Yan said the Hong Kong Monetary Authority will publish a taxonomy - a classification system - for credible green and climate-transition activities.

It will be aligned with taxonomies adopted internationally and in mainland China to facilitate Hong Kong's role as an international sustainable finance gateway.

Local and international banks and investors can then use the system to make decisions on whether to support projects in Asia.

Currently, companies in sectors such as steel smelting, cement and chemicals cannot use traditional green finance instruments to raise funds for decarbonisation projects, because such projects are not considered green.

Transition finance will be a hallmark of green finance in Asia-Pacific this year, underpinning continued strong issuance of sustainable bonds, a Moody's Investors Service report said on Wednesday.

Issuance of sustainable bonds in the region has been growing steadily after nearly tripling in 2021 to US$194 billion, reaching US$219 billion in 2022 and US$234 billion last year, it said.

Policy support for climate-transition technologies, including green hydrogen, biofuels, grid storage and carbon capture, utilisation and storage, is fuelling investment, Moody's analysts led by vice-president of sustainable finance Matthew Kuchtyak said in the report.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2024. South China Morning Post Publishers Ltd. All rights reserved.