If confidence in public finances begins to loosen, many who would normally be willing to lend to the government, that is, buy government securities, will be reluctant to do so due to concerns about not getting their money back. When fewer people are willing to lend and those who do demand a higher return for the risk they take, interest rates rise. In turn, this means that government expenditure increases, the situation worsens and there is a risk of entering a negative spiral with increasing expenditure and rising deficits and interest rates. In a worst case scenario, fiscal tightening may be required in an already poor economic situation in order to restore confidence. To succeed with this is, of course, very difficult, as the austerity measures mean that the economy will shrink further in the short term. This, in turn, reduces the tax base and simultaneously increases the need for support for vulnerable groups. Given that there is confidence in the sustainability of public finances, there is also room to use fiscal policy to counter recessions and address structural problems in the economy. To a large extent, fiscal policy stabilisation of economic activity takes place via so-called automatic stabilisers, without any political decisions having to be made.3 However, if there is confidence in public finances, it is also possible to make decisions about expenditure increases or tax cuts, so-called discretionary fiscal policy, without this giving rise to doubts about the sustainability of the finances.

One recent example is the collaboration with the Carbon Disclosure Project, a leading international environmental disclosure platform, to launch a climate risk assessment project that assists corporates especially SMEs in reporting company-level, climate-related data to help financial institutions assess risk and make credit decisions. Let me now turn to the third critical element, which is talent. And this is also our key focus area. We are undertaking multiple tasks here. Number one is training. We began by collating and sharing information about highquality training courses and qualifications through a centralised platform run by the Centre for Green and Sustainable Finance. Number two is incentives. Through a government-funded green finance training scheme, we provide subsidies to help market practitioners, students and graduates obtain training and qualifications related to green and sustainable finance. 2/4  BIS - Central bankers' speeches  Number three is developing a regulator-approved knowledge framework, or what we call the Enhanced Competency Framework, to provide a more structured programme for banking practitioners to build their knowledge and expertise in green and sustainable finance. This is a major undertaking that calls for close collaboration between the public and private sectors. It requires more than just regulatory push. The developmental work is equally important to provide the necessary ecosystem that supports climate financing. Indeed, Hong Kong has gone a long way in this regard and has firmly established its leadership role in the field of green and sustainable finance. As a snapshot, green and sustainable debt issuance in Hong Kong totalled $ billion in 2021.