Hong Kong Institute of Bankers Study Guide Quiz
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Questions and Answers

What is the primary purpose of the publication?

  • To promote financial products
  • To provide consultancy services
  • To serve as an educational resource (correct)
  • To offer legal advice regarding green finance

What liability does the Hong Kong Institute of Bankers disclaim in relation to the content of the study guide?

  • Liability for inaccuracies in financial data
  • Liability for direct or indirect losses (correct)
  • Liability for user misunderstanding
  • Liability for any copyright infringements

Which of the following is NOT provided by the Hong Kong Institute of Bankers?

  • Technical support
  • Consultancy services
  • Legal opinions (correct)
  • Educational material

What is prohibited regarding the content of the publication?

<p>Reproducing it without permission (B)</p> Signup and view all the answers

Which aspect is not ensured by the Hong Kong Institute of Bankers regarding the study guide?

<p>Completeness of the content (D)</p> Signup and view all the answers

What is the maximum grant amount for green and sustainable bond issues where the issuer has a recognized credit rating?

<p>HKD2.5 million (D)</p> Signup and view all the answers

Which of the following is NOT considered an eligible expense for the grant amount?

<p>Marketing expenses outside Hong Kong (A)</p> Signup and view all the answers

What is the criteria related to the issuance size for eligible bond issues?

<p>At least HKD100 million (D)</p> Signup and view all the answers

How many eligible loans can each entity apply for subsidy?

<p>Two (C)</p> Signup and view all the answers

Which requirement must eligible green, social, or sustainability-linked loans meet?

<p>Pre-issuance external review for alignment with standards (D)</p> Signup and view all the answers

What is the primary purpose of a transition label on a debt financing instrument?

<p>To communicate the issuer's strategic alignment with climate-related risks. (A)</p> Signup and view all the answers

What must an issuer establish before issuing a transition-labelled instrument?

<p>A corporate strategy addressing climate change-related risks. (C)</p> Signup and view all the answers

Which temperature limit should guide an issuer's climate strategy?

<p>At most 1.5°C increase ideally, and well below 2°C at the minimum. (A)</p> Signup and view all the answers

How should disclosures regarding corporate strategies be aligned?

<p>With recognized reporting frameworks like TCFD. (D)</p> Signup and view all the answers

What does climate transition finance entail for an issuer’s financing program?

<p>It supports the implementation of the issuer's climate change strategy. (A)</p> Signup and view all the answers

What is a corporate climate change strategy expected to do in response to stakeholder expectations?

<p>Purposefully seek to contribute positively to the Paris Agreement. (A)</p> Signup and view all the answers

Which of the following is NOT part of establishing a climate transition strategy?

<p>Creating a long-term growth plan unrelated to climate change. (B)</p> Signup and view all the answers

What role do climate change scenario providers play in the strategy design process?

<p>They inform the design of the climate strategy. (B)</p> Signup and view all the answers

What should a borrower communicate to lenders regarding a green loan?

<p>The process for determining eligibility and environmental sustainability objectives (B)</p> Signup and view all the answers

How should the proceeds from a green loan be managed by the borrower?

<p>Proceeds must be tracked in a separate account or in a designated manner (C)</p> Signup and view all the answers

What is a recommended practice for borrowers concerning environmental standards?

<p>They are encouraged to disclose any relevant green standards or certifications (B)</p> Signup and view all the answers

What type of information should borrowers keep available regarding the use of green loan proceeds?

<p>Up-to-date information on project allocations and expected impacts (B)</p> Signup and view all the answers

What should be included when borrowers report on their green loan projects?

<p>A list of projects, amounts allocated, and their expected impacts (C)</p> Signup and view all the answers

Why is it important for borrowers to establish an internal governance process for tracking funds?

<p>To promote transparency and integrity of the loan product (A)</p> Signup and view all the answers

How often should borrowers update the information regarding their green loan proceeds?

<p>Annually until fully drawn and as necessary thereafter (B)</p> Signup and view all the answers

What is a critical aspect of project evaluation and selection for borrowers?

<p>Determining how projects meet eligibility criteria and assessing environmental risks (A)</p> Signup and view all the answers

What is one of the major risks mentioned that threatens mankind's well-being?

<p>Climate change (D)</p> Signup and view all the answers

Which organization is committed to promoting green and sustainable finance in Hong Kong?

<p>Hong Kong Monetary Authority (HKMA) (C)</p> Signup and view all the answers

What is the focus of Phase I in HKMA's three-phased approach?

<p>Developing a common framework to assess greenness (C)</p> Signup and view all the answers

Which of the following statements best characterizes the GLP and GBP?

<p>They are frameworks adopted by various financial entities (A)</p> Signup and view all the answers

What is one of the outcomes that HKMA aims to achieve through its engagement with stakeholders?

<p>Setting standards for green investments (B)</p> Signup and view all the answers

What role does HKMA play in relation to international forums?

<p>It collaborates to support global green finance development. (A)</p> Signup and view all the answers

What type of assessment does the HKMA emphasize in Phase I?

<p>Greenness Baseline assessment (A)</p> Signup and view all the answers

What aspect of the banking industry is the HKMA primarily targeting for development?

<p>Green and sustainable banking (A)</p> Signup and view all the answers

What is one potential use of the funds in the blue finance mechanism?

<p>Promoting individual projects adhering to blue principles (B)</p> Signup and view all the answers

What does the blue finance mechanism aim to catalyze?

<p>High-impact projects for public sector development (A)</p> Signup and view all the answers

Which instrument is NOT mentioned as part of the blue finance mechanism?

<p>Traditional bank loans (A)</p> Signup and view all the answers

What role do ocean health credits play in the blue finance mechanism?

<p>Offer a return rate comparable to ESG products (C)</p> Signup and view all the answers

How can ocean health credits be structured to benefit project proponents?

<p>With increasing rates over time (A)</p> Signup and view all the answers

What type of capacity-building support can the blue finance mechanism provide?

<p>Assistance in developing project pipelines (D)</p> Signup and view all the answers

What is a key characteristic of returns on ocean health credits?

<p>Stepping up over a specified period (A)</p> Signup and view all the answers

What option do investors have regarding their ocean health credits upon maturity?

<p>Hold until maturity or exchange for equity (A)</p> Signup and view all the answers

Flashcards

Green Finance

The practice of incorporating environmental and social considerations into financial decision-making.

Sustainability

Meeting present needs without compromising future generations' ability to meet their needs.

Green Financial Instruments

Financial instruments and practices that aim to promote environmentally friendly projects and investments.

ESG (Environmental, Social and Governance)

A framework for assessing the potential environmental and social impacts of financial decisions.

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ESG Disclosure

The disclosure of environmental and social risks and opportunities in financial reporting.

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Transition Label

A label for debt financing instruments that signals an issuer's commitment to transforming their business model towards a low-carbon future, aligning with the Paris Agreement goals.

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Climate Transition

Focuses on the credibility of an issuer's climate change commitments and actions.

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Climate Transition Finance

The degree to which an issuer's financing activities support the implementation of their climate change strategy.

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Corporate Climate Change Strategy

A crucial element of transition finance, outlining how a company will adapt for a low-carbon economy.

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Corporate Climate Change Strategy (for Transition Label)

A pre-requisite for issuing a transition-labelled instrument, demonstrating a commitment to address climate change risks.

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Climate Change Scenario Providers

Organizations that provide climate change scenarios for companies to base their strategies on.

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Limiting Global Temperature Increases

A key goal incorporated into corporate climate change strategies, aligned with the Paris Agreement goals.

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Task Force on Climate-Related Financial Disclosures (TCFD)

Provides an authoritative framework for disclosures about a company's climate-related risks and opportunities.

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Borrower's role in green loans

Clearly communicating environmental sustainability objectives, project eligibility, and managing potential risks.

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Managing green loan proceeds

Maintaining transparency and promoting the integrity of the green loan by tracking the use of funds.

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Internal Governance for Green Loans

Establishing an internal process to track the allocation of green loan funds towards eligible projects.

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Reporting on green loan usage

Providing readily available information on the use of proceeds and the impact of green projects.

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Green Projects

The use of green loans to fund projects that achieve specific environmental sustainability objectives.

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Green Loan Project Evaluation

The process of determining whether a project qualifies for green loan funding based on predefined criteria.

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Typical Green Loan Projects

A category of projects expected to be supported by the green loan market, such as renewable energy or sustainable buildings.

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Green Standards and Certifications

Standards or certifications used to measure the environmental impact of projects seeking green loan funding.

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Green Loan Principles (GLP)

A set of principles and guidelines for green financing that encourages companies to incorporate environmental considerations into their business practices.

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Green Bond Principles (GBP)

A set of guidelines for green bond issuance that promotes transparency and accountability in green financing.

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HKMA's Approach to Green Banking

The Hong Kong Monetary Authority (HKMA) has a three-phased approach to promote green and sustainable banking.

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Phase I: Greenness Baseline

The first phase of HKMA's green banking approach focuses on developing a common framework to measure and assess banks' 'greenness' by evaluating their environmental and social practices.

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Phase II: Supervisory Expectations

The second phase of HKMA's green banking approach involves engaging with stakeholders to set standards and expectations for green and sustainable banking practices.

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Phase III: Implementation & Evaluation

The final phase of HKMA's green banking approach focuses on implementing, monitoring, and evaluating banks' progress in meeting the set targets for green and sustainable banking.

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Network for Greening the Financial System (NGFS)

A network of central banks and financial regulators committed to promoting green finance and addressing climate risks within the financial system.

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What is the maximum grant for green and sustainable bonds?

The amount of funding available for eligible green and sustainable bond projects, capped at HKD2.5 million if the issuer or guarantor has a credit rating from a HKMA-approved rating agency, and HKD1.25 million otherwise.

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What are the eligible expenses for a green bond grant?

Expenses related to issuing green and sustainable bonds, including fees for arrangers, legal advisors, auditors, rating agencies, as well as SEHK listing and CMU lodging and clearing charges.

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What is an external review for green bonds?

An independent assessment of a green or sustainable bond's alignment with internationally recognised principles and standards. It's required for both first-time and repeat issuers, with a limit of two eligible loans per entity.

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What are the criteria for eligible green bonds?

The issuance size must be at least HKD100 million (or equivalent in foreign currency), lodged and cleared by the CMU, or listed on SEHK. It must be issued to at least 10 investors or less than 10 non-associated investors.

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What are the criteria for eligibility for green, social, sustainability, and sustainability-linked bonds?

Pre-issuance external reviews by recognised experts must demonstrate alignment with internationally-recognised principles, standards, or guidance for green, social, sustainability, and sustainability-linked bonds.

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Ocean Health Credit

A financial instrument designed to support ocean conservation projects, offering investors a comparable return to other ESG products.

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Public-Private Partnership Projects

Projects that have limited revenue but offer significant environmental benefits and cost savings.

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Blue Finance Mechanism

Financial instruments that support projects aligned with 'blue' principles, focusing on sustainable ocean practices.

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Impact Investment

A type of investment focused on generating positive social and environmental impact alongside financial returns.

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Ocean Health Credit Payment Structure

The initial years of an Ocean Health Credit may have low payments to provide immediate funding, with rates increasing over time.

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Ocean Health Credit Exit Option

Investors can choose to hold their Ocean Health Credits until maturity for returns, or exchange them for equity in the project.

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Capacity Building Support

Strengthening institutions and individuals involved in ocean conservation projects through training, resources, and knowledge sharing.

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ESG (Environmental, Social, and Governance) Principles

A set of principles and practices that consider environmental, social, and governance factors in financial decision-making.

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Study Notes

Green Finance and Sustainability

  • This is a study guide published by the Hong Kong Institute of Bankers
  • It covers topics related to green finance and ESG.
  • The guide was last updated in July 2024
  • The guide is for educational purposes only and doesn't provide legal or expert advice.
  • The guide is not liable for any losses or damages arising from its use.

List of Chapters

  • Chapter 1: Overview of Green Finance and ESG
  • Chapter 2: Green Finance Instruments
  • Chapter 3: ESG Investing Considerations
  • Chapter 4: Green Finance Certification and ESG Rating

Chapter 1: Overview of Green Finance and ESG

  • Learning Outcomes: Upon completion, learners will be able to describe ESG and ESG strategies, discuss ESG equity and debt investment, describe the relationship among ESG, green finance and sustainability, list the influence and impact of climate risk on the banking industry, identify ESG regulatory development, identify the guidance to issuers in relation to the climate transition finance, discuss the green loan principles, green bond principles, social bond principles and sustainability bonds guidelines, identify the green regulatory development, and discuss the emergence of blue finance.
  • List of Topics: Introduction to ESG, What is ESG, ESG Strategies, ESG Equity and Debt Investment, Relationship among ESG, Green Finance, and Sustainability, Influence and Impact of Climate Risk on the Banking Industry, ESG Regulatory Development, Climate Transition Finance, Company's Climate Transition Strategy, Company's Business Model Environmental Materiality, Company's Climate Transition Strategy to be Science-based, including Targets and Pathways, Company's Implementation Transparency, Introduction to Green Loans and Green Bonds, Green Loan Principles, Green Bond Principles, Social Bond Principles, Sustainability Bonds Guidelines, Green Regulatory Development, Emergence of Blue Finance, Chapter Summary, References Summary, Review Questions, Further Reading

Chapter 2: Green Finance Instruments

  • Learning Outcomes: Upon completion, learners will be able to distinguish between green loans and green bonds, identify the eligible green projects, describe the bond issuer green framework, discuss the green washing risks, describe the green securitisation, distinguish green securitisation and green bonds, and discuss the green auto ABS, solar ABS, green RMBS, green CMBS and green CLO.
  • List of Topics: Green Debt, Green Loans vs. Green Bonds, Identification of Eligible Green Projects, Bond Issuer Green Framework, Green Washing Risks, Green Securitisation, Defining Green Securitisation, Green Securitisation vs. Green Bonds, Green Auto Loan ABS, Solar ABS, Green RMBS, Green CMBS, Green CLO, Chapter Summary, References Summary, Review Questions and Further Reading.

Chapter 3: ESG Investing Considerations

  • Learning Outcomes: Upon completion, learners will be able to identify the key ESG value drivers, discuss the analysis of environmental, social and governance factors, identify the ESG risks and opportunities from banks' perspective, discuss the ESG valuation for equities and fixed income, describe the ESG investment guidelines, discuss the ESG asset allocation and company analysis, and discuss socially responsible investing (SRI).
  • List of Topics: ESG Analysis, ESG Value Drivers, Analysis of Environmental Factors, Analysis of Social Factors, Analysis of Governance Factors, Identifying ESG Risks from Banks' perspective, Identifying ESG Opportunities from Bank's perspective, ESG Valuation, ESG and Valuation Models, ESG in Equity Valuation, ESG in Fixed Income Valuation, ESG Investment Decision Process, ESG Investment Guidelines, ESG Asset Allocation, ESG Company Analysis, Socially Responsible Investing (SRI), Chapter Summary, References Summary, Review Questions, and Further Reading.

Chapter 4: Green Finance Certification and ESG Rating

  • Learning Outcomes: Upon completion, learners will be able to identify the green certification and ESG rating market development, discuss HKQAA green finance certification approach, and discuss MSCI ESG rating methodology.
  • List of Topics: Overview of Green Finance Certification and ESG Rating Global Practice, Green Certification: Market Development, Major Players, ESG Ratings: Market Development, Major Players, HKQAA Green Finance Certification, Green Finance Design: Core Reference and Qualitative Approach, Green Finance Scheme Setting: Pre-Issuance and Post-Issuance Stages, Green Certification Process, MSCI ESG Rating, MSCI ESG Rating Scale, MSCI ESG Rating Methodology Three Pillars, MSCI ESG Rating Process, Chapter Summary, References Summary, Review Questions, and Further Reading.

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Green Finance and Sustainability Study Guide PDF

Description

Test your knowledge on the guidelines and criteria set forth by the Hong Kong Institute of Bankers. This quiz covers the primary purposes, liabilities, grant details, and eligibility concerning green and sustainable bond issues. Assess your understanding of essential aspects of the study guide and its applications.

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