The launch by the Hong Kong Stock Exchange (HKEX) of a Sustainable and Green Exchange (STAGE) in early December marked the latest initiative to position the Special Administrative Region as one of Asia’s leading green finance hubs.
As Asia’s first multi-asset sustainable investment product platform, STAGE supports a fast-growing demand for sustainable finance, according to Grace Hui, HKEX’s head of green and sustainable finance. Hui explains that riding on the growing activity in the Asian green bond market, coupled with the considerable growth of sustainable and green investment funding in Asia, the aim is to give Hong Kong a head start in promoting itself as a green financial hub.
‘With the launch of STAGE, we are seeking to support the growth of Hong Kong’s sustainable finance market by increasing awareness, accessibility, data availability, and transparency of green and sustainable investment products,’ she says.
Growth market
According to HKEX, Asia-Pacific green bond issuances reached new levels in 2019, raising US$18.89bn (with mainland China’s green bond market alone accounting for US$8.1m), while the cumulative amount of green bonds arranged and issued in the local Hong Kong market reached US$26bn at the end of 2019.
In the initial phase, STAGE will provide a repository of information on sustainability, green and social bonds, as well as environmental, social and governance (ESG)-related exchange traded products, listed on the HKEX. To gain listing, issuers are required to designate the bonds’ sustainability, green or social classification and state the international standards or principles that they adhere to.
It is crucial for accountancy professionals to raise their awareness and understanding of sustainable business practices so that they can deploy their skills to assist clients in the use of the STAGE platform
In addition, issuers are required to submit a copy of the bond framework, which usually includes information on the use of proceeds, project selection, management and reporting.
In terms of the relevance to Hong Kong’s accounting sector, Hui says the database should prove useful for a range of organisations, however they choose to integrate sustainability concepts.
‘These reports, whether at the pre-issuance or post-issuance stage, are independently reviewed by external parties such as accountants,’ Hui explains.
Strategic partner
Accountants can be strategic partners as organisations transition towards a more sustainable future. With this in mind, Hui says that it is crucial for accountancy professionals to raise their awareness and understanding of sustainable business practices so that they can deploy their skills to assist clients in the use of the STAGE platform.
‘Accountants can add some fluency of how to interpret the data,’ says Sammie Leung, ESG leader at PwC Hong Kong.
She believes that STAGE will help to fill data gaps when investors are looking to evaluate ESG investment products. ‘Companies and issuers that are prepared to be more sustainable want investors to know they are making a difference,’ she says.
Apart from large rating agencies, currently investors have limited access to a homogeneous way of evaluating the individual elements of environmental, social and governance components of ESG investment products which, depending on the industry, can vary widely. ‘It’s not a case of crunching numbers,’ Leung says.
For example, water consumption or emissions used in manufacturing and the privacy component of a retail investment can have a different impact on investment decision-making.
‘In the accounting world we take it for granted we have P&L, balance sheets and cash statements, but evaluating ESG standards has not reached that level yet,’ Leung says.
Utilising a platform like STAGE, accountants are able to link the numbers to operations and produce information based on common themes for different stakeholders to analyse and base decisions on.
Filter out the noise
‘Accountants understand both the business aspects and the numbers, which allows them to filter out some of the noise and focus on the key areas,’ Leung says.
If, as expected, demand for ESG and related investment products continues to grow, there will be an increase in demand for accountants to specialise in measuring and managing non-financial metrics. ‘I believe demand for a mix of competencies will evolve based on ESG, climate change, emissions and science modelling for financial disclosure,’ she notes.
Tom Liu, principal consultant with Hong Kong-based GreenCo ESG Advisory, which acted as a consultant in preparing the framework for STAGE, also believes that accountants have a role to play working with both issuers and investors.
By leveraging their expertise in sustainability concepts and key performance indicators, accountants are central to measuring the environmental and social impacts of projects associated with issued bonds and other financial products.
‘The sustainability agenda is touching every element of industry and the investment community,’ notes Liu, who says that the launch of STAGE provides a timely platform for decision-makers.
‘STAGE is a robust platform which enables sustainably-related investment products from across the world, but particularly those launched in local markets, to converge in an organised way,’ he says.
China’s pledge to achieve carbon neutrality by 2060 has provided a shot in the arm to global climate mitigation and as a result will generate demand for ESG-related investment products.
Furthermore, Liu says, Hong Kong’s status as a strategically positioned international finance hub will enable the city to tap into the ESG investment activities of the Greater Bay Area (GBA), which comprises Hong Kong, Macau and nine cities in Southern China’s Guangdong province and has a combined population of about 70 million.
Further information
Read more about how accountants can support businesses in being sustainable and prosperous in ACCA’s series of reports on natural capital management
