Arthur Yuen: Greening financial institutions
Welcome remarks by Mr Arthur Yuen, Deputy Chief Executive of the Hong Kong Monetary
Authority, at the HKMA and International Finance Corporation (IFC) Seminar on "Greening
Financial Institutions", Hong Kong, 11 October 2019.
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1. Vivek (Pathak), ladies and gentlemen, good morning.
2. It gives me great pleasure to welcome you to today's seminar on greening financial
institutions.
3. The effects of climate change are already visible around the world. In the past four decades,
we have witnessed some of the warmest years on record, and the number of natural
disasters has more than doubled. In Asia, 50% of our urban population are living in low-lying
coastal zones and flood plains. The long-term effects of climate change will likely bring
damages to our economies and businesses.
4. Hong Kong sits along the coast and therefore climate change risk is particularly relevant to
us. For instance, I believe banks in Hong Kong felt impacted by the Super Typhoon
Mangkhut from last year. Whereas properties close to the harbour used to be valued better,
banks would now have more considerations on their valuations when granting mortgages.
5. Under this setting, not only are the governments being compelled to act in the face of climate
change, most notably under the 2015 Paris Agreement, there is also a growing consensus
amongst central banks and financial regulators to take a more proactive stance against
these risks.
6. For example, the Central Banks and Supervisors Network for Greening the Financial
System, commonly known as the NGFS, in which over 40 central banks and supervisors
have already reached a consensus: and I quote, "climate-related risks are a source of
financial risk and therefore fall squarely within the mandates of central banks and
supervisors to ensure that the financial system is resilient to these risks." The HKMA is a
member of NGFS, and we are fully on board with this
7. The Bank for International Settlements is also committed to supporting green finance and
investment practices, and supports the NGFS research on climate-related risks and their
implications for financial stability.
8. The HKMA has many roles - as a bank regulator, one of the largest asset owners globally,
and a key promoter of market development. Hence, the HKMA is in a very advantageous
position to promote green and sustainable finance in Hong Kong. In May this year, we
unveiled three sets of measures on green finance:
9. The first measure is a three-phased approach to promote Green and Sustainable Banking in
Hong Kong. Initially, to develop a common framework to assess the existing baseline of
individual banks to establish how "green" they are, by talking to the industry to identify the
parameters to be included in the assessment; secondly, to engage and consult the industry
on whether supervisory requirements are needed; and if needed, how the HKMA should
develop our supervisory expectation or requirements; and thirdly to focus on implementation,
monitoring and evaluation.
10. The second measure relates to responsible investment by the Exchange Fund. The
Exchange Fund now adopts a guiding principle that priority will be given to Green and ESG
investments, if the long term return is comparable with other investments on a risk-adjusted
basis.
11. Our third measure is the launch of the Centre for Green Finance under the HKMA's
Infrastructure Financing Facilitation Office, focusing on capacity building to facilitate the
equipping of financial institutions with the knowledge, skills, tools and other resources in
green finance.
12. In fact, we're now in our developmental plan to prepare banks for the upcoming changes. A
working group on the assessment framework has been in place since August, and today's
seminar marks the beginning of the capacity building programme for the Centre for Green
Finance. On the other hand, the assessment framework will help banks understand their
readiness for change, while the capacity building events will equip practitioners with the
necessary knowledge for the changes.
13. For today's seminar, we will first invite the IFC to provide an overview of the opportunities
and challenges to green banking, and introduce some case studies on their approach to
assisting banks in "greening" their operations. This afternoon, several banks will share their
initiatives and practical experience on their green journey, including governance, risk
management, disclosure and green products and business policy.
14. And here I would like to extend our special thanks to the IFC for their dedicated support for
this workshop. Their expertise will surely benefit our audience today. I would also like to
thank HSBC, Standard Chartered Bank, Citibank, BOC and BNP Paribas for sharing their
experiences with everyone later today.
15. Ladies and gentlemen, I wish you all a fruitful workshop and I look forward to working closely
together with the industry to develop green and sustainable banking in Hong Kong. Thank
you very much.