The total combined headcount across 18 banks in the city is down 2,000 from just 12 months ago.

More than a year after the pandemic first began, its effect on Hong Kong banks’ headcounts has finally been reflected in its 2021 bank rankings, with over 2,100 workers in the industry displaced. But whilst the crisis is finally winding down as vaccines are rolled out across the city, banks—both local and foreign—face a new type of challenge: navigating the growing preference for sustainability, whose importance has been further highlighted in the past year as COVID-19 raged worldwide.

Asian Banking & Finance’s 2021 edition of its Hong Kong Annual Bank Rankings sees Hong Kong and Shanghai Banking Corporation (HSBC) maintain its lead with an estimated 29,000 employees in the city—albeit 2,000 employees fewer than last year. This may be partly due to the bank’s earlier announced plans to lay off 35,000 employees. Whilst the February 2020 plan was momentarily frozen during the height of the pandemic, CEO Noel Quinn has indicated the resumption of staff cuts began again in June 2020.

The next nine banks after HSBC remained unchanged in rank. Bank of China (Hong Kong) maintained its second spot, and as of 31 December 2020 employed 12,557 staff—slightly lower than in 2020, when it had 12,592 employees in the city. Hang Seng Bank’s headcount shrunk by 634, to total 7,881 employees at the end of last year; whilst Standard Chartered’s estimated number of employees in Hong Kong was 500 lower than in the 2020 rankings.

In contrast, the city’s fifth and sixth-largest banks in terms of headcount—The Bank of East Asia (BEA) and Citi Hong Kong—both expanded their numbers. BEA’s total workforce inched up to 5,576; whilst Citi gained about 100 new employees.

Overall, the total number of people employed across 18 banks in Hong Kong decreased to 89,511 as of 31 December 2020. This is 2.31% or 2,161 lower than the total number of employees of the 18 banks based on data from the prior rankings list. Decreases in the headcount numbers of those in the Top Four were offset by expansions of banks below them, notably Shanghai Commercial Bank and Public Bank.

Shanghai Commercial Bank recorded the biggest rise in rank, jumping two places up to claim the 13th spot. The bank gained over 260 new employees as of end-2020, enabling it to edge past Chong Hing Bank and CWB Wing Lung Bank. Meanwhile, Public Bank gained the most number of employees since its numbers were last updated in 2019. The bank now employs over 1,300 people in the city, with almost 800 new people added.

The smallest bank featured on the list, Tai Sang Bank, stands strong despite the 2020 maelstrom and more or less maintained its crew of about 30 employees (34 if counting those from its subsidiaries, as indicated in its annual report). The bank is known for operating only a single branch and for not offering any digital or ATM services, according to local media reports. Instead, the bank says it focuses on the quality over quantity of its services, and on building up a strong customer relationship with its clients. But even the physical branch-reliant bank served a digital upgrade amidst a time of lockdowns and continuous social distancing: a new and improved website.

The ESG agenda
The importance of environmental, social, and governance (ESG) agenda has only been amplified through COVID-19, with banks having a critically important role to play in providing essential support to their customers, businesses, and their staff, professional services firm KPMG noted in a report.

“COVID-19 has shone a bright spotlight on societal issues – the ‘S’ of ESG,” KMPG wrote. “It has heightened the relevance of existing social challenges: access to healthcare, financial security, financial inclusion, and issues of social justice and equality.”

Hong Kong’s banking industry has not been spared from growing calls for ESG accountability, and local authorities and banks have responded, with a particular focus on the “environment” aspect. The Hong Kong Monetary Authority set out a three-phased approach to promote green and sustainable banking in the financial centre, with the latest set of actions released in December 2020.

Banks are not to be left behind. Citi Hong Kong recently facilitated over US$23.5b equivalent in ESG debt financing in Asia so far in 2021, Citi spokesperson James Griffiths shared to Asian Banking & Finance. Over the same first five months of the year in 2020, this amount was just over US$4.5b. In part due to the strong response, Citibank globally has raised its combined current environmental finance target from $250b by 2025 to $500b by 2030.

Sustainability preferred
The strong take-up of ESG-compliant financing reflects not just Citi ramping up its related financing services, but also a growth in interest for this type of financing from companies and individuals in the region.

Interest in ESG compliant financial products is also being supported by the local government. Recently, Hong Kong SAR released a $2.5b green bond, following the city’s net-zero pledge, and Citi served as one of the bond’s bookrunners.

Local-based Hang Seng Bank established an ESG Steering Committee in 2020, chaired by the CEO, along with four supporting Working Groups (ESG Strategy, Environmental, Corporate Social Responsibility, and ESG Disclosure), to further sharpen its sustainability focus with high-level management oversight and further integrate ESG considerations into their business and operations.

Hang Seng Bank is also the first Hong Kong bank to sign up for the international Task Force on Climate-related Financial Disclosure (TCFD).

“We are broadening the variety of our products and services in line with our ESG priorities – in particular, we are stepping up our activity in the area of sustainable finance,” a Hang Seng Bank spokesperson told the Asian Banking and Finance, sharing that the bank’s commercial banking arm has set up a new designated green financing team and is offering all-round green financing solutions to its customers, from large corporates to small and medium enterprises.

The two banks are not just transforming their services to be more ESG-compliant, but also their own operations. Citi Hong Kong recently installed 360 solar panels in Citi Tower. Hang Seng Bank is also currently installing solar panels at Hang Seng 113 and has revamped its ESG disclosure by committing to TCFD standards and revamping its website to make its progress more transparent to the public.

The future of work
Awareness for ESG isn’t just the only major change accelerated by the pandemic: a new way of working may also be here to stay.

During the pandemic, 85% of Hang Seng Bank’s back-office staff worked from home. Moving forward, the bank spokesperson told the Asian Banking and Finance that they plan to “continue to build on these agile ways of working in other aspects of our operations.”

“The COVID-19 experience has exposed the weaknesses of rigidly hierarchal corporate cultures that are still common in many businesses and this may prompt an acceleration in rethinking corporate structures and the transformation of internal cultures to give employees more agency to try new ideas, challenge existing processes, make decisions, and make greater contributions to business success,” a Hang Seng Bank spokesperson said regarding changes in workplace attitudes and cultures in the near future.

“A high-performing culture is very difficult to replicate, and this makes it a powerful competitive advantage. Product and service innovations, marketing initiatives and even ‘strategy’ are easily reproduced. Corporate culture is not.”

For their part, Hang Seng Bank has reportedly introduced flexible ways of working, which include flexible hours, personal time and provision for alternative working locations.

Citi Hong Kong also shared plans to embrace a hybrid work set-up for most of its employees, with colleagues possibly working from home for up to two days a week, Griffiths said.

2024 update

Hong Kong’s Green Taxonomy Framework Sets the Stage for Sustainable Finance Leadership

The Hong Kong Monetary Authority (HKMA) is advancing sustainable finance by considering mandatory green regulations for banks. The HKMA’s green taxonomy framework, introduced last month, helps banks and investors assess the sustainability of economic activities across energy, transport, construction, and water and waste management sectors. This framework aims to prevent greenwashing and may shift from voluntary to mandatory compliance. The banking sector will need to integrate this framework into their risk management and investment strategies, enhancing transparency and accountability. Hong Kong’s green bond program further supports sustainable financing, aiming to raise HK$20 billion. Despite challenges like increased operational costs, the initiative promises long-term economic and environmental benefits.

The Hong Kong Monetary Authority (HKMA) is taking significant steps to bolster sustainable financing by considering mandatory green regulations for the banking sector.

The initiative aims to support the city’s development as a leader in green and sustainable finance.

The HKMA’s green taxonomy framework, introduced last month, is designed to help banks and investors assess the sustainability of economic activities.

Covering 12 economic activities across four sectors—energy, transport, construction, and water and waste management—the framework provides a clear reference for determining what constitutes as green, thereby preventing greenwashing.

The Hong Kong Monetary Authority’s Green Taxonomy Framework

The HKMA’s green taxonomy framework is a pivotal component of Hong Kong’s strategy to enhance sustainable financing.

Issued last month, the framework aims to provide a standardized method for banks and investors to evaluate the greenness of economic activities.

It encompasses 12 economic activities across four critical sectors: energy, transport, construction, and water and waste management.

By offering clear definitions and classifications, the framework helps mitigate the risk of greenwashing, ensuring that investments genuinely contribute to sustainability.

Kenneth Hui, HKMA’s executive director, emphasized the potential shift from voluntary adoption to mandatory compliance, underscoring the framework’s importance in building a solid investor base.

Additionally, the HKMA is exploring the inclusion of more green activities, such as hydrogen and hydropower, and plans to incorporate transition financing. This comprehensive approach aims to provide industry-specific guidance, ensuring practical and effective implementation across the banking sector.

Implications for the Banking Sector

The mandatory adoption of the HKMA’s green taxonomy framework will have profound implications for Hong Kong’s banking sector.

Banks will need to integrate the framework into their risk management and investment strategies, ensuring that their portfolios align with the defined green criteria.

This shift will likely necessitate significant adjustments in how banks evaluate and report on their sustainability practices.

Additionally, the framework’s emphasis on transparency and accountability will require banks to enhance their disclosure practices, providing detailed information on their environmental impact.

This could lead to increased operational costs as banks invest in new systems and processes to comply with the regulations. However, the long-term benefits include attracting sustainability-focused investors and mitigating the risks associated with climate change.

By aligning with global standards, Hong Kong’s banks can enhance their competitiveness and reputation in the international market, positioning themselves as leaders in sustainable finance.

Green Bonds and Sustainable Financing

Hong Kong’s commitment to sustainable financing is further exemplified by its robust green bond program. The government has unveiled plans for a multi-tranche sale of green bonds in various currencies, including the dollar, euro, and offshore yuan.

These bonds, expected to be rated highly by S&P Global and Fitch Ratings, aim to raise HK$20 billion in the 2024-2025 financial year.

The proceeds will finance or refinance eligible projects under the government’s green bond framework, which includes categories such as renewable energy, pollution prevention, and climate change adaptation.

This initiative not only supports environmental benefits but also strengthens Hong Kong’s position as a leading hub for green and sustainable finance.

By providing a clear and structured approach to green investments, the bond program aligns with the HKMA’s green taxonomy framework, ensuring that funds are directed towards genuinely sustainable projects. This alignment enhances investor confidence and promotes long-term economic and environmental sustainability.

Consumer and Market Reactions

Consumer and market reactions to Hong Kong’s green regulation initiative have been largely positive. A recent survey revealed that 78% of Hong Kong consumers are willing to pay higher prices for sustainable products, reflecting a strong demand for corporate sustainability.

Additionally, 57% of respondents felt their favorite brands were not doing enough on sustainability, indicating a market opportunity for businesses to enhance their green credentials. T

he financial market has also shown support, with green and sustainable debt issued in Hong Kong accounting for over a third of such debt across Asia in 2023, despite a year-on-year volume decrease.

Challenges and Future Prospects

Despite the positive momentum, challenges remain in implementing Hong Kong’s green regulation initiative.

The primary concerns include the potential increase in operational costs for banks and the need for enhanced disclosure practices. Additionally, the risk of greenwashing and the complexity of integrating new regulations into existing frameworks pose significant hurdles.

However, the future prospects are promising. By aligning with global standards and expanding the green taxonomy to include more activities, Hong Kong can solidify its position as a leader in sustainable finance. The ongoing commitment to green bonds and sustainable projects will further drive long-term economic and environmental benefits.