SCMP: Dubai and Hong Kong are looking to adapt their capital market regulations to facilitate the issuance and listing of green bonds, helping elevate both financial hubs as primary sources of funds for climate-friendly projects.
That will help strengthen the Asia-Middle East investment corridor as authorities in both align their regulatory frameworks to promote sustainable finance, according to Ian Johnston, CEO of the Dubai Financial Services Authority (DFSA).

“As capital market regulators, our job is to do what we can to enable [sustainable] finance to support the green agenda set by the governments,” he said in an interview with the Post on Tuesday. The cooperation with the Hong Kong Monetary Authority [HKMA] “will give greater effects to that,” he added.

Both financial-market regulators agreed on Monday to bolster their collaboration in the area, by enhancing cross-border dialogue, deepening information exchanges, and conducting research to add momentum to the industry development.

Sustainable finance supports actions to address a variety of environmental issues, including climate change and carbon pollution. It was a key area of focus when Dubai and Hong Kong signed an agreement a year ago to establish the Asia-Middle East economic corridor to support cross-border trading, family offices and fintech innovations.

Companies and agencies raised US$15.6 billion from the sale of green bonds in Hong Kong last year, making it the 10th busiest market for such securities, according to data compiled by US-based non-profit Climate Bonds Initiative.

Unranked Dubai is not standing still. While catching up, the DFSA has published several strategies on the expansion of sustainable finance in the United Arab Emirates and its surrounding regions.

“Hong Kong is a more mature market,” Johnston said. “We have been happy to learn from Hong Kong for our regulatory requirements and have always benchmarked ourselves against Hong Kong, as well as other leading markets.”

Efforts by Dubai and Hong Kong to find common ground on standards and regulations to create seamless green financing in both jurisdictions will inject confidence in the market, according to Lionel Mok, sustainable finance programme lead for Civic Exchange, a public policy think tank.

“It’s useful that these two financial markets are going to formalise their efforts to cooperate and work on policies that can enable more international flows,” he said. They can aim to harmonise green taxonomies, making it easier to recognise green definitions across borders, he added.

Hong Kong, which has a well-established regime on sustainability reporting and disclosure, can also help Dubai companies build similar capacity, Mok said.

In return, Hong Kong could do more to remove barriers to financing that adheres to the tenets of the Islamic faith. A dual listing or dual issuance of Shariah-compliant green bonds in both markets, for example, could unlock a lot of capital for green projects, he added.

“We will look at what we can do in terms of helping those [green] bonds to come to market, and what we can do about developing our regulatory regimes to make them friendly for listing,” Johnston said.

Originally published on SCMP on 20 Sept 2024.