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Green finance is Hong Kong’s golden opportunity to lead Asia’s net-zero mission

Few can doubt China’s leadership in advancing green tech and green energy. Solar installations are growing at a pace that would increase global capacity by 85% by 2025. China today has more solar panels installed in large-scale projects than the rest of the world combined. While China has taken the global e-vehicle (EV) market by storm as the world’s largest producer of e-vehicles, with BYD usurping Tesla as the world’s top EV maker. On the roads, 45% of all cars in China are electric, compared with 25% in Europe and about 11% in the US, according to the International Energy Agency.

Riding this momentum, Hong Kong as China’s international technology hub and a bridge to the rest of Asia faces a huge opportunity to help advance the region’s net-zero goals. By working with and walking the same path as China, Asia can realise a rapid transformation of energy and other key sectors to positively impact the global climate change issue.

Asia is ideally placed and must rise to the challenge of leading the world’s net-zero transition, was the rallying call from Poman Lo, Founder of Institute of Sustainability and Technology (IST) and convenor of the inaugural One Earth Summit, held recently in Hong Kong in late March. She and other industry leaders echoed the sentiments of Hong Kong’s Chief Executive Lee Ka Chiu, who noted the city’s traditional financial strengths and its fast rising prowess as an innovative and technology centre, make it  the ideal place for building partnerships for driving innovative solutions to promote sustainability.

Hosted in Hong Kong, the first-ever One Earth Summit was a unique collaboration between the government and NGOs led by IST and aims to make a genuine difference with a clear focus on action and impact on climate change. The event was endorsed by global sustainability leaders, from World Economic Forum’s Giving to Amplify Earth Action (GAEA) group as the co-organizer, to a list of backers and key speakers including: Claus Schwab, founder of WEF; global investment giants Ray Dalio, Jim Coulter of TPG Capital, and Prince Max of Lichenstein, plus renowned climate scientist, Johan Rockstrom and many others.

Hong Kong firsts: green bonds and more  

The commitment to excel in the area of green finance has gathered pace with the Government’s actions in recent years. Hong Kong leads the way with innovations such as the world’s first tokenised green bond. The total issuance amount for the retail green bond has already reached HK$20 billion, far above its original target. While the government has also recently announced an additional batch of digital green bonds totalling HK$6 billion and plans to increase annual green bond issuance to HK$65 billion. The programme’s scope will also be expanded to cover sustainable finance projects.

Another market-leading move is Hong Kong’s ambition to be among the first jurisdictions globally to align sustainability disclosures with benchmarks published by the International Sustainability Standards Board (ISSB). Hong Kong’s Secretary for Financial Services and the Treasury, Christopher Hui declared a vision statement to launch a roadmap within 2024 to provide a transparent and well-defined pathway on sustainability reporting for businesses in Hong Kong.

This enhances the city’s fast-emerging green finance ecosystem by advancing the foundations for a green taxonomy. Hong Kong already has many critical pieces in place: a green and sustainable finance grant scheme, government green bond framework, ESG skills training subsidies, mandatory ESG disclosure requirements and government debt issuance, but an industry-wide recognised taxonomy will go some way to establishing clearer reporting standards.

Ecosystem strength with progress at multiple levels

Other major breakthroughs include the Hong Kong Monetary Authority (HKMA)’s physical risk assessment online platform to support all the local authorised institutions that come under the regulator’s scope of work. All banks in Hong Kong will be able to leverage this platform to analyse their existing climate-related physical risk portfolio. As HKMA is the first regulator globally to introduce such an initiative, it sends a positive signal about Hong Kong’s capabilities in climate risk and shows that the city is a proactive leader in green and sustainable finance.  

Financial Services and the Treasury Bureau, Securities and Futures Commission, InvestHK, and Cyberport are collaborating on a Hong Kong Green Fintech Map, which aims to help private companies identify Green FinTech solutions that align with their business needs. This first-of-its-kind initiative in Hong Kong, the directory and business matching platform is currently in its soft launch stage and will support robust growth of the city’s FinTech eco-system.

This momentum also goes beyond government institutions. Corporations like Arkreen Network and Hashkey Group are on a mission to spearhead the development of the decentralised physical infrastructure network (DePIN) ecosystem, as the concept is being lined up to facilitate the transactions in Renewable Energy Certificates. Envisioning Hong Kong as a global hub for this innovative ecosystem, Arkreen aims to establish data-based, on-chain tokenization and offset as the standard for carbon neutrality in the Web3 community, fostering an inclusive climate action network for the global community.  

 

Hong Kong’s ace card: Mainland China’s offshore capital and risk management hub

On the global stage, Hong Kong has an incredible role to play as Mainland China’s offshore capital hub for green finance, as it needs the city to bridge its huge green financing gap in order to support a transition to a low-carbon economy.

“Asia’s green transformation will require around US$66 trillion in investment over the next 30 years, highlighting the huge demand for green financing in the region,” said Joseph Chan, Undersecretary for Financial Services and the Treasury. He also noted that at the Redefining Hong Kong conference last November that Hong Kong is on the up as it accounts for a third of total green and sustainable debt in Asia – including both bonds and loans.

The city is one of the world’s biggest green finance hubs, with around 220 ESG funds with assets under management of US$170 billion, according to latest government figures. Hong Kong attracts investments from investors around the world, securing its position as China’s offshore capital hub for green finance. Take the news of Australian family office Twynam Group for example, which pledged to raise US$50million in capital to invest in tech companies with focus reducing carbon emissions in Hong Kong and the wider Greater Bay Area (GBA).

Combining this flow of capital with Hong Kong’s fast-emerging green tech ecosystem, the potential for genuine impact is staggering. The city is already home to more than 4,200 start-ups, with increasingly strong investment appetite in green ventures from private equity and venture capital investors in Hong Kong, who together manage around US$220 billion of assets. 

As the honourable financial secretary noted in his earlier blog on the topic of sustainability, “Hong Kong's highly efficient financing platform and technological strengths are becoming the driving forces of green transformation for the city, the country and the Asian region.” This truly is a golden opportunity for the city as we bring together entrepreneurs, plus private and public sector leaders, to drive cross-sectoral interaction and collaboration between green tech and green finance, and to better leverage Hong Kong's role as an international platform for climate change.

 

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