In Hong Kong, fintech will play a key role in creating a more environmentally-friendly financial system and help the city reach its green finance ambitions, experts told Fintech News Hong Kong.
Technology and sustainability are quickly emerging as two key driving forces reshaping the global financial ecosystem. Given Hong Kong’s existing position as one of the world’s largest fintech hubs, the city is poised to become the next leader in green finance.
Citing the example of China, which is not only the largest and fastest growing green finance market in the world, but also the most advanced fintech market, Arnaud Picut, Head of Global Risk Management Practice of financial software provider Finastra, noted the direct correlation between a country’s appetite of growing green finance and the dynamism of its fintech industry.
Strong fintech ecosystem vital for green finance’s progress
“There will be no progress in green finance without a strong fintech community,”
Picut told Fintech News Hong Kong.
“Fintech provides new means and methods … [and] could be an effective tool … to increase capacity for identification and classification of ‘green,’ lower the cost of green certification, or improve green credit ratings systems for small and medium-sized enterprises (SMEs) to build greater access to financing.”
Echoing Picut, Dr. William Yu, Founder and CEO of non-governmental organisation World Green Organisation (WGO), said that advancement in technology and fintech will play a key in shaping the future of financial services, citing for example the use of blockchain applications to enhance the transparency in sustainability efforts, creating reliable records in environmental projects.
Global inflows into sustainable funds were up a whopping 88% in Q4 2020 to US$152.3 billion compared with the same period in 2019, data from Morningstar show, showcasing booming investors’ appetite for firms with a strong environmental, social and governance (ESG) track record.
But for sustainable finance to effectively play its role, financial markets must embrace new technologies capable of analysing raw data to limit greenwashing and ensuring businesses transition to long-term sustainable practices. And given the rapid pace at which the ESG data market is growing, there’s no doubt that technology will be critical in helping financial institutions meet the rigor required in this new and evolving realm of ESG/sustainability data, Glenn Frommer, Founder of consultancy firm ESG Matters, told Fintech News Hong Kong.
“With green finance growing rapidly, its potential as the next frontier in the fintech ecosystem is unquestionable,”
Frommer said.
“Fintech is a critical enabler for green finance, starting with the mass of ESG data needing to be considered for financial investments. I would state that green finance, in the sense that financial investments include ESG considerations, is a critical part of the fintech ecosystem.”
Push to fulfill Hong Kong’s green fintech sector
Hong Kong’s green fintech is still small and rather nascent, but recent developments are suggesting that the sector is poised to take off.
Picut noted the establishment of the Hong Kong Green Finance Association (HKGFA) in 2018 which now counts nearly 150 members, including four in the “technology” category.
He said that locally, Cyberport, a digital tech park and Hong Kong’s largest fintech hub with over 380 companies, has been amongst the most active industry participants on the topic, having named green finance as one of its key streams of development.
Promoting green and sustainable banking was one of the initiatives announced by the Hong Kong Monetary Authority (HKMA) in May 2019. Since then, several initiatives have followed including the establishment of the Green and Sustainable Finance Cross-Agency Steering Group. The group is responsible for coordinating the management of climate and environmental risks to the financial sector and accelerating the growth of green and sustainable finance in Hong Kong.
Most recently, the HKMA released its guideline on the Green and Sustainable Finance Grant Scheme. The scheme provides subsidies for eligible bond issuers and loan borrowers to cover their expenses on bond issuance and external review services, and aims to support green and sustainable bond issuance and lending.
Cyberport’s upcoming Green Finance Series
In the coming weeks, it will be hosting the three-part Cyberport Green Finance Series which will welcome Yu, Frommer and Picut, among other speakers, who will share the latest development in green finance and discuss the green finance market in Asia and Hong Kong especially. Registration for the event can be completed through Cyberport’s website five days in advance at the latest.
The first session, taking place on July 29, 2021, will give an overview of the green finance landscape, share best practices, and explore international policy and measures.
Meanwhile, the second session, on August 12, 2021, will delve into sustainability-related financial risks in Hong Kong and Asia amid the so-called “pandemic era”.
Finally, the third session, on August 19, 2021, will feature case studies of integration of green finance with technology in Europe.
All three sessions will be moderated by alumni of the Cyberport University Partnership Programme (CUPP), a program that gives students the opportunity to participate in an Online Entrepreneurship Boot Camp and receive mentorship from industry elites.
“Although Hong Kong green fintech has been developing rapidly, it is only the beginning of the journey. As the fintech hub of the city, Cyberport will continue to play an important role in promoting green finance to strengthen Hong Kong as an international financial center, ”
said Eric Chan, Chief Public Mission Officer of Cyberport.
Featured image credit: Photo by Martin Cox on Unsplash
