In a rapidly changing world, financial developments move forward with great speed. As an international financial centre, Hong Kong must lead in financial development in the new era. Digital finance and green finance are two areas which offer unmissable opportunities. In the 11th ‘INSIGHT FORUM’ webinar organised by Our Hong Kong Foundation (OHKF), the Financial Secretary of the HKSAR Government, Mr Paul Chan, alongside a panel of guest speakers, discussed the prospects for dual-track development of digital and green finance in Hong Kong.

Establishing a Global Corridor Network and a Financial Hub

The digital financial ecosystem has been growing apace, and digital finance bears increasing importance especially under the Covid-19 pandemic. Hong Kong must seize the opportunities arising from the rise of ‘Central Bank Digital Currency (CBDC)’ and establish an effective ‘cross-border corridor network’ with other countries or regions, while building appropriate financial infrastructure and networks. A joint research project on CBDC by the Hong Kong Monetary Authority and the Central Bank of Thailand in 2019, known as Inthanon-Lionrock, was a significant first step for Hong Kong towards becoming a digital financial trading hub.

Consolidating Hong Kong’s Position as an Offshore Renminbi Centre

Hong Kong is currently the world's largest offshore Renminbi (RMB) centre, with an RMB 650-billion capital pool. It is expected that the global financial market will continue to display strong demand for RMB products in the future. Hong Kong, as a vital bridge between the world and mainland China, will have an even more important role to play. It may consider providing a foundation for offline use of digital RMB, and facilitating capital flow within the Greater Bay Area by capitalising on the flexibility of digital currency.

Setting Long-Term Strategies for Decarbonisation and Accelerating Low-Carbon Transition for Enterprises

The threat of climate change is imminent, and countries around the world have started committing to reducing carbon emission. The development of green finance is imperative. Being an international financial centre, Hong Kong takes on an essential role in the process of low-carbon transition. Financial institutions must carefully assess the risks that climate change brings to their businesses, and ensure that they become adequately equipped to accommodate its impact. In addition, they should actively provide funds for ‘green projects’ such as the harnessing of renewable energy, and speed up the process of low-carbon transition. In doing so, financial institutions may serve as the engine that drives towards energy efficiency and decarbonisation, and promotes climate change mitigation through more active climate risk management.

Developing Green Finance under a Low-Carbon Economic Model

The financial industry is a pivotal stakeholder in the long-term decarbonisation initiative. Both mainland China and the European Union, having developed their respective ‘Green Taxonomy’, are now working together to discuss ways to reconcile their different standards in terms of regulation, financial incentives, and capacity building, in order to guide and assist financial institutions in developing green finance-related businesses. Hong Kong may also refer to relevant international standards, and formulate its own localised decarbonisation plans for its three core industries:  energy, construction, and transportation. This not only provides guidelines that financial institutions can follow, but also smooths Hong Kong’s transition into a low-carbon economy.

Mrs Eva Cheng, Executive Director of OHKF, described the OHKF as a key advocator that has actively promoted digital and green finance in Hong Kong during recent years. ‘Hong Kong should embrace the opportunities for financial development in this new era. By directing and supporting the growth of digital and green finance, Hong Kong will be able to gradually transform itself from a traditional financial centre into a digital and green financial centre,’ said Mrs Cheng.

Other guests attending the forum were Professor Kar Yan Tam, Dean of Business and Management of the Hong Kong University of Science and Technology; Dr Frank Tong, Managing Partner of QBN Capital; and Mr Water Cheung, Board Chair of Carbon Care Asia Limited. They all expressed valuable opinions on Hong Kong's digital and green finance development.