•  The paper also examines regulatory development trends in ESG, in particular how ESG fosters technology innovations

Hong Kong – 3 November 2021 – The FinTech Association of Hong Kong has today launched a new white paper, “Our Changing Climate: Applying RegTech to Green Finance” in conjunction with the Law, Innovation, Technology & Entrepreneurship Lab at the University of Hong Kong.  The report has been released to coincide with Hong Kong Fintech Week 2021 and COP26, and aims to help demystify the ESG and sustainable finance landscape at a critical time for financial services.

Over the past few years, green finance and RegTech have become central discussion points in the banking, securities and asset management industries.  At the same time, governments around the world, including in Hong Kong, have launched various initiatives in support of green finance. As a result, the demand for green finance products is expected to grow exponentially, driven by increasing investment opportunities, supportive government policies and developing infrastructure such as for green bonds.

However, there remain regulatory challenges to widespread acceptance of green finance. Greenwashing is a misleading yet common phenomenon, where reporting and disclosure practices are all too often insufficient, and the presentation and measurement of environmental data is inconsistent.  In addition, climate risk is often excluded or simply miscalculated by firms.  All this damages investor confidence and harms the development of a fully functioning green finance movement.

To address this matter, FTAHK has collaborated with LITE Lab@HKU to develop this paper.  FTAHK’s RegTech Committee, and in particular its former co-chair and now Board member of FTAHK, Irene Lee, supervised a student from LITE Lab@HKU who consulted with experts and industry professionals in the fields of banking, technology and environmental protection.  Based on this work, the white paper highlights four RegTech applications which have the potential to improve the adoption of green finance:

• Using social media, eco-labelling and blockchain technologies to combat greenwashing
• Using blockchain for land registration to decrease risks for green investments
• Using data technologies, such as cloud and machine learning, for the disclosure, comparison and monitoring of climate risk and environmental data
• Using data technologies and statistical tools, such as scenario analysis, simulation and stress testing, to enhance risk management and governance frameworks

Combining existing technologies and new technologies, RegTech has the potential to play a big part in combating the regulatory challenges currently facing green finance. The paper also shows that there is significant interest from investors in contributing to developments in this area, with total global investment activity in RegTech reaching USD 3.4 billion in 2019.

The paper argues that regulators should continue to take the lead in the development of green finance and encourage market developments through adopting globally unified standards and benchmarks.  In addition, with the need for green finance increasing, banks can be a catalyst for change while companies that are not disclosing data might face competitive disadvantages.

Benjamin Quinlan, Chairman, FinTech Association of Hong Kong, said, “Recent years have seen the topics of ESG and sustainability move from a ‘nice to have’ to an operational necessity for many firms in the finance industry. With ESG fundraising activity exploding in recent years, the commercial opportunity for industry participants cannot be ignored.”

Brian W. Tang, Founding Executive Director, LITE Lab@HKU, former co-chair of the FTAHK RegTech Committee and current Board Member of FTAHK, said, “This white paper is the proud product and confluence of three important trends – RegTech, sustainable finance and talent development. Climate change is increasingly recognised as one of the defining challenges of this generation.  For the sake of all our future generations, we look forward to playing a part in growing this important space.”

Helene Li, General Manager, FinTech Association of Hong Kong, added, “Working with LITE Lab@HKU, our paper not only delineates clearly the current landscape, it is also a step forward in building out the talent pipeline much needed to drive this important agenda for Hong Kong.”

Representatives from both FTAHK and LITE Lab@HKU will be speaking about this paper at Hong Kong Fintech Week 2021 during the panel discussion “Our Changing Climate – Applying RegTech to Green Finance” today, Wednesday 3 June, at 10.00am.

Click white paper image below or here to download it. 

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About the FinTech Association of Hong Kong

The FinTech Association of Hong Kong (FTAHK) is an independent, not-for-profit, member-driven organisation that is the voice of the FinTech community in Hong Kong.  Members range from promising startups and passionate individuals to FinTech unicorns, global financial institutions, and leading professional service providers. FTAHK is led by a volunteer group of board members from the FinTech community who care about the future of FinTech in Hong Kong, mainland China, and Asia.  The Association’s three initial goals are to:

• Advocate – create the unified voice for the Hong Kong FinTech ecosystem

• Collaborate – bring together the diverse parts of the community

• Educate – learn from existing leaders and nurture the next generation of talent

For more information about the FinTech Association of Hong Kong and how you can join, go to: http://hkfintech.org/

About the Law, Innovation, Technology & Entrepreneurship Lab at University of Hong Kong Faculty of Law

Law, Innovation, Technology and Entrepreneurship Lab at the University of Hong Kong Faculty of Law (LITE Lab@HKU) is an interdisciplinary and experiential programme that engages with under-resourced organisations to co-design impactful legal, regulatory and policy research as well as LawTech and RegTech proof-of-concepts with students from law and other discuplines to enable and support the development of requisite innovative and entrepreneurial skillsets and mindsets for the jobs of tomorrow. .

For more information about the LITE Lab@HKU, go to: https://litelab.law.hku.hk/