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Published: 23:01, November 28, 2023 | Updated: 09:55, November 29, 2023
SAR is playing a unique role in nation’s transition to low-carbon economy
By Oriol Caudevilla
Published:23:01, November 28, 2023 Updated:09:55, November 29, 2023 By Oriol Caudevilla

The United Nations’ resident coordinator in China, Siddharth Chatterjee, while addressing the Hong Kong Financial Forum 2023 on Monday, said that the city has a unique role to play as China’s offshore capital hub for green finance, as the country accelerates environmentally friendly projects in its transition to a low-carbon economy.

More specifically, Chatterjee mentioned that, “while China is working to address its environmental and climate challenges, it remains the largest emitter of greenhouse gases”. (Editor’s note: China’s per capita emissions, at 10.5 metric tons/capita in 2019, remain considerably lower than those of the developed world; for example, the United States, at 17.6 metric tons/capita.) He added: “China must build on the substantial progress it has made in green finance by expanding and accelerating projects with environmental benefits. ... This is where Hong Kong has a unique role to play as China’s offshore capital hub, for both traditional finance, and green finance.”

Before proceeding, it is important to define green finance. According to the UN Environment Program, green finance aims to “increase the level of financial flows (from banking, micro-credit, insurance and investment) from the public, private and not-for-profit sectors to sustainable development priorities. A key part of this is to better manage environmental and social risks, take up opportunities that bring both a decent rate of return and environmental benefit, and deliver greater accountability.” The pandemic showed us (if there was any doubt before) that achieving sustainable development is more necessary than it has ever been.

Actually, what Chatterjee mentioned in the Hong Kong Financial Forum 2023 goes in line with what I have mentioned in some of my previous articles regarding Hong Kong becoming a regional hub for green technology and finance.

Hong Kong’s interest in strengthening its position as a greentech and green finance hub is not new. As I mentioned in my column, Hong Kong Rightfully Becoming a Green Finance Hub (April 23, 2021, China Daily), by embracing green finance even more, Hong Kong would be consistent with China’s goal of reaching its carbon emissions peak before 2030 and becoming carbon neutral before 2060, as listed in the 14th Five-Year Plan (2021-25) for National Economic and Social Development and the Long-Range Objectives Through the Year 2035.

Both of China’s objectives are crucial for achieving green development. By way of comparison, the US and the European Union aim to achieve carbon neutrality by 2050. If they meet their targets, it will have taken the US around 45 years and the EU around 60 years to move from their carbon emissions peak to achieve neutrality, but China plans to do it in just 30 years, which is a very ambitious, yet reachable, goal.

Therefore, Hong Kong tapping into green and sustainable finance is not only beneficial for the special administrative region, but also consistent with China’s objective of paying enormous attention to sustainability and climate change.

To sum up, while Hong Kong remains and will remain one of the most important financial centers in the world, it seems the perfect time for the city to promote its role as a greentech and green finance hub

Green bond markets have been increasing in size and value for more than a decade. Since the first green bond market opened in 2007, more than $1 trillion worth of green bonds have been issued globally as investors have identified a sustainable and profitable investment option. As a matter of fact, oversubscription, where demand exceeds the number of green bonds available, has become the norm for green bond issuances.

Hong Kong is, thus far, quite advanced when it comes to embracing the opportunities offered by green finance and green bonds.

In June 2018, the HKSAR government launched the Green Bond Grant Scheme to subsidize eligible green bond issuers in obtaining certification under the Hong Kong Quality Assurance Agency’s Green Finance Certification Scheme. In September 2018, the Hong Kong Green Finance Association was set up, bringing together some 100 market practitioners and business front runners to promote the HKSAR as a green finance capital.

And, more recently, in February 2023, the Hong Kong Monetary Authority confirmed its first HK$800 million ($102 million) tokenized green bond issuance. The one-year bond was priced at 4.05 percent and distributed by a syndicate of four banks: Bank of China (HK), Credit Agricole CIB, HSBC and Goldman Sachs. The bond used the Goldman Sachs Digital Asset Platform which runs on a permissioned blockchain, making Hong Kong the first government in the world to issue a tokenized green bond — which shows once again that Hong Kong is at the forefront of new technologies and finance.

Another speaker at the Hong Kong Financial Forum 2023, Financial Secretary Paul Chan Mo-po, said that tackling climate change and shifting to a sustainable economic model will require a huge amount of investment. “Asia’s green transformation will require around $66 trillion in investment over the next 30 years, highlighting the huge demand for green financing in the region,” said Chan. “With such large demand for (green) financing, we cannot only rely on the government but must utilize market resources to achieve this.”

Chatterjee also highlighted the Industrial and Commercial Bank of China’s issuance of the world’s first green interbank regular cooperation bond to fund green Belt and Road Initiative projects in 2019. The bond was denominated in yuan, US dollars and euros totaling $2.2 billion. “The example of China embracing green financing can serve as an example of how other countries and the private sector can embrace financial sustainability while protecting the environment,” said Chatterjee.

To sum up, while Hong Kong remains and will remain one of the most important financial centers in the world, it seems the perfect time for the city to promote its role as a greentech and green finance hub. The investment will definitely pay off. As Chan mentioned, there is a huge demand for green financing in the region, I am sure the investment will pay off, given Hong Kong’s unique role within China and the Guangdong-Hong Kong-Macao Greater Bay Area in particular.

The author is a fintech adviser, a researcher, and a former business analyst for a Hong Kong publicly listed company.

The views do not necessarily reflect those of China Daily.

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