Asia Needs Uniform ESG Rules to Avoid Greenwashing, HKEX Chair Says

By BLOOMBERG

A lack of universal standards for environmental, social and governance data is exacerbating greenwashing risks in Asia and stalling the global transition to a low-carbon economy, according to the Hong Kong Stock Exchange Chairman Laura Cha.

“The problem with the reliability of data is that there is a lack of common taxonomy and requirement, so we’re not comparing the same thing,” Cha said in an interview from Hong Kong for Bloomberg Live’s Green Summit at COP26 in Glasgow, Scotland.

Investing based on ESG criteria has enjoyed a gold rush in recent years, but scarcity of transparent, high-quality data makes compliance murky. The absence of uniform standards, or taxonomy, across Asia and even within China makes it harder to compare and assess green investments.

Sustainable finance has long faced calls for common standards, with investors expected to pour $53 trillion into ESG assets by 2025, according to Bloomberg Intelligence. China and the European Union released a report last week on how they classify sustainable financing amid ongoing efforts to simplify the jumble of standards and practices globally.

The wide array of metrics is a particular challenge for Hong Kong, which seeks to establish itself as a hub for green financing as investors and issuers become increasingly focused on environmental priorities.

The bourse has limited power when it comes to policing companies on disclosure and compliance, Cha said, even though it’s the regulator of more than 2,500 mainly Chinese firms. “Defining compliance is not easy when you do not have a universal set of standards and requirements.”

The exchange has no plans to require listed companies to meet net zero goals to raise money on the bourse. Cha reiterated the exchange’s purpose isn’t to stop polluters, but to encourage renewable energy companies, particularly producers of solar panels and wind turbines that have been aggressively promoted by China. The country’s climate goals have recently been hampered by reality as escalating power outages have forced it to import more coal and gas.

Many major economies, including China, India and Saudi Arabia, the world’s biggest oil exporter, have pledged net zero emissions within the next few decades, but there’s no clear consensus on how countries will achieve their goals. Cha said it’s unrealistic for all countries to adopt the same timeline for carbon neutrality.

“You can’t completely disengage from polluting industries,” Cha said. “It comes at a human cost.”