Regulatory challenges hamper widespread acceptance of green finance products, says new document from FTAHK and LITE [email protected]
FTAHK (The FinTech Association of Hong Kong) and LITE [email protected] published a new white paper calling for the use of regtech to facilitate the development of green finance markets.
While demand for green finance products is expected to increase in the coming years, regulatory challenges are hampering widespread acceptance of these products, the document said.
Among these challenges, greenwashing has been a key objective for regulators, reporting and disclosure practices are often insufficient, the presentation and measurement of environmental data are always inconsistent and climate risk is often excluded or simply miscalculated by businesses.
“These regulatory challenges undermine investor confidence and hamper the development of green finance,” the document said, arguing that regtech has a key role to play in addressing the challenges.
The paper describes how four regtech applications can help improve green finance adoption.
- Using social media, eco-labeling and blockchain technologies to fight greenwashing
- Using blockchain for land registration to reduce the risks of green investments
- Use of data technologies, such as cloud and machine learning, for the disclosure, comparison and tracking of data on climate and environmental risks
- Use data technologies and statistical tools, such as scenario analysis, simulation and stress testing, to improve risk management and governance frameworks
To make technologies more efficient, the document says regulators should continue to take the lead in green finance development to encourage market developments, including creating and adopting a globally unified standard and benchmark for green finance.
Regulators should also ensure that there is sufficient disclosure to enable investors and the public to understand the nature of green investments as well as to enable them to monitor and assess the environmental progress of such investments.
“The launch of the document comes with the ongoing COP26 in Glasgow and IOSCO is also coincidentally issuing its guidelines against greenwashing,” said Brian Tang, board member for FTAHK and LITE. [email protected] founding executive director.
“We hope that our white paper can intensify the discussions and the implementation of ABCD technologies (AI, blockchain, cloud, data), and in particular more alternative data, to improve transparency, disclosure and accountability and develop a sustainable funding to address these pressing issues on our planet. “
A complete copy of the white paper is available here.