HKMA’s Eddie Yue on Transition Finance: Asia’s Challenge, Three Policy Lessons, and a Multi-Year Action Agenda

Eddie Yue, Chief Executive of the Hong Kong Monetary Authority (HKMA), delivered opening remarks at the HKMA‑AoF/HKIMR‑CEPR International Conference on Climate, Capital, and Policy. He outlined a pragmatic view of transition finance, emphasizing that the question is no longer whether to transition, but how to do so structurally.

A new phase in the transition

Yue observed that while ESG sentiment has shifted in some markets, the underlying reality remains: climate change is relentless, and decarbonisation is becoming more important, not less. This is especially acute in Asia‑Pacific, which accounts for more than half of global carbon emissions yet continues rapid economic expansion and rising energy demand. Sustainable finance, he argued, must therefore support credible transition pathways in high‑emitting sectors that remain essential to growth.

He cited China’s 15th Five‑Year Plan (2026‑2030), which targets a 17% reduction in carbon intensity per unit of GDP, as an example of embedding decarbonisation into an economic blueprint.

Three policy priorities from academic research

Drawing on a study by Nobel laureates Daron Acemoglu and Philippe Aghion (CEPR Fellows), Yue highlighted three lessons for policymakers:

Address both costs and benefits – Policies should account for the societal costs of fossil fuels while supporting adoption of cleaner technologies, which generate economy‑wide benefits and promote sustainable growth.

Act early to avoid lock‑in – Economies heavily reliant on fossil fuels face higher transition costs. Credible early action makes low‑carbon alternatives more competitive, allowing policy support to taper over time.

Cross‑border ripple effects – Progress in one economy reduces the cost and increases the appeal for others to follow, helping to lower global emissions.

HKMA’s action agenda

Yue explained that these lessons underpin the HKMA’s Sustainable Finance Action Agenda (launched 2024), which focuses on three fronts:

Lowering transition costs – Using FinTech (e.g., tokenisation of green bonds and carbon credits) to reduce transaction and operational costs. The Alliance for Green Commercial Banks helps regional banks build green capacity and talent.

Early action to prevent high‑emission lock‑in – A multi‑year framework includes two rounds of climate risk stress testing and integrating transition planning into supervisory expectations. This pushes banks to redirect capital away from carbon‑intensive activities now.

Driving cross‑border progress – The Hong Kong Taxonomy (Phase 1 and Phase 2A) is designed for cross‑border compatibility. The HKMA is also developing disclosure requirements aligned with international standards and actively participating in global forums.

Blended finance as a critical tool

Yue acknowledged that the scale and complexity of transition challenges require nuanced approaches. Blended finance – combining concessional and commercial capital – is essential to fill funding gaps and leverage private sector capital for sustainable development.

New HKIMR research on transition finance

Yue noted that the HKIMR has just published *Applied Research Report No.2/2026: “Navigating the Green Shift: Opportunities and the Evolving Landscape of Transition Finance.”* Based on a global survey, the report finds growing momentum in transition finance, particularly in Asia. It highlights that scaling transition finance requires deep cross‑border and cross‑sector collaboration, with public‑private partnerships, blended finance, multilateral institutions, and private capital playing complementary roles.