Where the money goes?

Green Finance Advisor of Friends of the Earth (HK)

As green bonds have become a popular source of financing with rising demand from fixed income investors, we can see burgeoning issuance of the securities. Over the month, Industrial Commercial Bank of China just announced to issue the first ever green bond dedicated to the development of the Greater Bay Area, with a total amount equivalent to over USD 3 billion. The proceeds will be used to finance assets specifically related to low-carbon and low emission transportation as well as renewable energy in the Greater Bay Area. As the green bond market evolves, we can observe some interesting patterns in how the capital is deployed.

Since the first green bond made its debut in Hong Kong in 2015, a total of USD 11 billion of green bonds has been raised for various usages. To be classified as a green bond, a project has to fulfill certain criteria throughout the life cycle of the capital raised. And first and foremost, the use of proceeds should be closely related to environment and sustainable development. According to International Capital Market Association, the eligible categories of applications range from pollution control, sustainable management of natural resources, renewable energy, water and energy efficiency, clean and resilient transport, waste water management to green building. We can expect the more active our green bond market is, the more capital will flow into diverse environmentally friendly projects.

Interestingly, having said that, currently the Hong Kong’s green bond market is inclined to certain areas due to its market structure. Based on HKMA’s figures, low carbon building (37%), water (21%) and energy (14%) are the areas that most proceeds are allocated to. Unsurprisingly, tilting towards ‘building’ is due to the fact that many green bond issuers are primarily property developers, such as Hang Lung Properties and New World Development. Meanwhile, as a gateway Chinese issuers and international investors, Hong Kong’s green bond supply has also been underpinned by Chinese companies as the market is becoming more mature with the support from the authorities. As a result, several companies engaging in the energy, transport and water businesses have also left their footprints in the Hong Kong’s green bond market, and we expect the trend to continue onwards.

The recent issuance by ICBC sheds lights on the future development of the green bond market in Hong Kong. As an international financial center and the pivot of the Greater Bay Area, Hong Kong should continue to gain tractions from Chinese corporates. According to the People’s Bank of China (PBoC), we expect to see more active green finance activities in Hong Kong in order to achieve national environmental goals mentioned in the 13th Five-Year Plan, which is expected to require an annual investment of at least RMB 2 trillion, of which environmental protection and clean energy will be the key focuses. We look forward to seeing how these opportunities can provide impetus for the city’s sustainable development!

Source 1: “Green Bond Market Briefing” of Climate Bond Initiative, February 2019
Source 2: “The Green Bond Trend Global, Mainland China and Hong Kong” of HKEX, December 2018
Source 3: “Green Bond Market Briefing” of Climate Bond Initiative, February 2019
Source 4: “The Green Bond Trend Global, Mainland China and Hong Kong” of HKEX, December 2018

乾淨煤不乾淨 / Clean coal is not clean

香港地球之友綠色金融顧問  / Green Finance Advisor of Friends of the Earth (HK) 

雖然越來越多的銀行和金融機構正試圖削減與煤炭行業的關係,但該行業的參與者正試圖獲得清潔煤炭技術的綠色融資。潔淨煤技術是一系列技術,旨在減少燃煤燃燒產生的碳排放和其他污染物。然而,考慮到煤炭開采的處理,煤炭運輸的物流和燃煤發電的“清潔”過程,我們認為潔淨煤技術更像是一個神話而非解決方案。 首先,煤炭必須從地下開採。考慮到對環境的破壞,這很難成為一項綠色工作,更不用說將煤運到發電廠的問題了。確實存在的主要問題是,目前可用的大多數商業化清潔煤技術在降低碳和其他污染物方面效率不高。事實證明,一些現有的潔淨煤項目排放的污染物不僅少於污染物。簡而言之,潔淨煤技術通常不被視為發電的可行綠色解決方案。不鼓勵使用綠色資本來為克萊恩煤炭技術提供資金。



關於清潔煤的一些資訊 (來源: endcoal.org)(只有英文版)

While more banks and financial institutions are trying to cut their ties to the coal industry, the industry’s participants are trying to get green financing for clean coal technologies. Clean coal technologies are a collection of technologies targeting to cut down the carbon emissions and other pollutants generated in burning coal for power generation. However, considering the processing of coal mining, the logistics in transporting coal and the “cleaning” process in coal-fired power generation, we see clean coal technology is more like a myth than a solution.

First of all, coal has to be mined out of the ground. This can hardly be a green exercise considering the damage to the environment, not to mention the issues in transporting coal to power plants. The major problem indeed is that most of the commercialized clean-coal technologies available at present are not efficient in reducing carbon and other pollutants. Some existing clean coal projects are in fact proved to be emitting more but not less pollutants. In a nutshell, clean coal technologies are generally not perceived as a viable green solution for power generation. Using green capital to finance clean coal technologies is not encouraged.

Some facts about clean coal from endcoal.org

氣候變化與陸地……綠色農業需要綠色金融的支持 / Climate Change and Land .. Greener Farming Calls for Greener Finance

Alexandra Tracy, 香港地球之友綠色金融顧問 / Green Finance Advisor of Friends of the Earth (HK)








農業生產商與商品交易商是加入綠色貸款結構的先導者之一。Danone、Louis Dreyfus和歐洲的Gunvor集團等國際企業,及後來才加入的一些亞洲主要企業,都希望通過綠色貸款,盡力達到以更可持續的方式進行生產並帶來更便宜的資本成本。

2017年,新加坡控股公司豐益國際與荷蘭銀行ING達成了1.5億美元的綠色貸款共識,是棕櫚油行業中的第一宗此類交易。一家重要的區域性商品交易商Olam International立即跟隨,,很快便進行了亞洲首宗可持續發展表現掛鉤貸款,15家銀行共同向該公司提供資金。



“Climate Change and Land”, published by the Intergovernmental Panel on Climate Change (IPCC) this month, puts the focus clearly on how we use – and often misuse – natural resources.

The climate change impact of agriculture, deforestation and land conversion around the world accounts for nearly 25 percent of total greenhouse gas emissions, according to the IPCC.  Land masses are natural carbon sinks, but deforestation, agriculture and observable weather factors mean that their carbon dioxide absorption capacity may be significantly reduced.

While the world needs to maintain its natural environment, the growing global population needs ever more land to feed itself.  Managing the policy trade offs between feeding the people, on the one hand, and addressing the urgency of climate change, on the other, is becoming one of the greatest challenges for governments in the twenty first century.

But there are actions that could help to meet that imperative.  Reducing deforestation, together with action to regenerate degraded ecosystems, is perhaps the most important – the current situation in the Amazon is a cause for dismay.  Almost as pressing, however, is the need to reduce food waste along the entire supply chain, from the farm gate to the supermarket: over a quarter of food produced is not consumed.  And the production of food itself needs to become more sustainable.

A recent report from the World Resources Institute, “Creating a Sustainable Food Future”, highlights opportunities for technological innovation and changes in farming practice that could feed nearly 10 billion people by the year 2050 – while also meeting climate goals.  This would involve raising agricultural productivity, managing demand and reducing waste (not just giving up meat) and reducing greenhouse gas emissions generated in the production chain.  At the same time, natural ecosystems protection and reforestation will be essential.

What role can finance play in greening agriculture ?

The new stars of the green finance world are green and sustainability loans, which link the interest rate payable to meeting sustainability performance targets.  Unlike green bonds, the money raised can be used for general corporate purposes, not just specific green projects, but the borrower must quantify and report its environmental or sustainability benefits each year.

Agricultural producers and commodity traders have been some of the first movers in signing up to green loan structures.  Global players such as Danone, Louis Dreyfus and Gunvor Group in Europe have latterly been joined by major players in Asia, looking to leverage their efforts to produce more sustainably into a cheaper cost of capital.

In 2017, Wilmar International in Singapore agreed a US$150 million green loan with Dutch bank ING, which was the first deal of its kind in the palm oil industry.  Olam International, a substantial regional commodities trader, soon followed with Asia’s first sustainability linked club loan (in which fifteen banks jointly extended funds to the company).

Most recently, in July this year, Cofco International, the trading division of China’s biggest food company, has agreed a US$2.1 billion facility, which is the first sustainability loan in China and the largest to a commodity trader.  Interest rates will be linked to targets which include transparency in the supply chain to ensure that it is not contributing to deforestation.

Speaking about impact of the loan on the company’s business, Jing Wu, chief financial officer at Cofco International, argued that “future demand of agri commodities can only be met by sustainable sourcing”.  Green finance, coupled with clear performance on sustainability, will help to transform the agricultural sector and ensure it plays its part in our long term future.

為甚麼自然資源成本那麼重要? / Why does Natural Capital Cost matter?

Michele Leung, 香港地球之友綠色金融顧問 / Green Finance Advisor of Friends of the Earth (HK)


2013年,聯合國曾斥資開展一項具有標誌性意義的研究,名為「自然資源的危機:100個商業外部成本」的分析,並作為推動「生態系統及生物多樣性經濟學」的廣泛措施之一。 分析估計世界初級產業的土地使用、水用量、溫室氣體排放、空氣污染、土地和水污染、以及廢物的處理成本高達近7.3萬億美元。

2019年5月,生物多樣性和生態系統服務政府間科學 ― 政策平台(IPBES)發表了一份新報告,報告中發布的一些普遍統計數據和事實描述了令人擔憂的趨勢:

  • 75%:人類活動迄今為止「嚴重改變」了陸地環境的比率(海洋環境佔66%)
  • 47%:全球生態系統的規模和狀態指標比估計的自然標準減少了的比率(當中不少指標以每十年至少4%的幅度下降)



Natural capital is defined as the limited stocks of physical and biological resources found on earth including water, land, air and habitats while the term natural capital cost is used to describe the unpriced or non-market value of the environmental resources that businesses depend on. Natural capital valuation would supplement the ESG analysis with economic valuation of environmental inputs.

In 2013, a landmark study commissioned by UN, Natural Capital at Risk: The Top 100 Externalities of Business[1] analysis was launched and also as part of a wider initiative on The Economics of Ecosystems and Biodiversity. The estimated cost of land use, water consumption, GHG emissions, air pollution, land and water pollution and waste for the world’s primary sectors amounts to almost US$7.3 trillion.

In May 2019, the Intergovernmental Panel on Biodiversity and Ecosystem Services (IPBES) issued a new report[2], some of the general statistics and facts published in the report describe alarming trends:

  • 75%: terrestrial environment “severely altered” to date by human actions (marine environments 66%)
  • 47%: reduction in global indicators of ecosystem extent and condition against their estimated natural baselines, with many continuing to decline by at least 4% per decade

The 2020 Aichi Targets – a set of global biodiversity commitments agreed by governments in 2010 – were designed to slow the rate of loss of biodiversity and provide foundations for a more sustainable economy, yet IPBES report implied these targets will be missed. All these pointed that natural’s contribution is very vital to us and our future generations. The implications of risk arising from biodiversity loss should be more widely and deeply understood.

The nature can be conserved, restored and used sustainably through collaborative efforts from business to financial investors. One approach would be to start integrating natural capital cost into valuation. The monetary quantification of resources used by a company and environmental externalities created enables the system integration of environmental risks into valuation and pricing mechanisms. It allows for consideration of environmental externalities in financial analysis of companies, and the potential impact on financials and credit risk, which would then be aggregated at portfolio level. Companies can use natural capital valuation to better understand the risks they face as a result of environmental and social impact costs, while financial institutions would also stress test its portfolio for specific environmental risks and adjust its asset allocation strategy according to environmental risk.

[1] https://www.trucost.com/publication/natural-capital-risk-top-100-externalities-business/
[2] Summary for policymakers of the global assessment report on biodiversity and ecosystem services of the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services

地球著火了 / The Earth is on Fire

【意見交流園地】Karen Ho / 【Idea Exchange】Karen Ho






挪威最大的投資者、管理著1,700億美元的綜合資產的Storebrand ASA以及KLP養老基金,正在研究哪些公司可能需要對火災造成的任何潛在損害負上責任。他們正在與不同企業商討,並加強研究,以確定誰應對任何潛在損害負責。瑞典政府也正在接觸其養老基金,以確保他們的投資不會引起對亞馬遜地區的環境破壞。





亞馬遜正在求救!請捐助Earth Alliance – Amazon Fund 以及 Rainforest Alliance 等慈善機構伸出援手!


  1. 促請巴西政府必須積極尋求方法處理災情,世界各國長遠亦應改用可持續發展模式,停止開墾亞馬遜雨林。
  2. 促請政府增加本港的綠化比率,營造一個香港人的「碳匯」。
  3. 2005年開始本會舉辦《酷森林》,超過9,300名參加者成功登山植樹,在各大郊野公園共種植了83,000棵本地品種小樹苗。《酷森林2020》將於明年春季假大欖郊野公園舉行,本會已為此展開了籌備工作。
  4. 本會為「賽馬會智慧城市樹木管理計劃」提供樹木培訓。在來年,我們會安排更多中學講座和社區研討會,以加強市民對樹木的認識。


What is happening?

The fire raging across Brazil’s Amazon has become a global concern this week, it was being called as an “international crisis” by French President Emmanuel Macron. The Amazon is known as the “Lungs of the planet”, and everyone on the planet benefits from the health of the Amazon as its trees take in carbon dioxide and release oxygen. It is also the largest, most diverse tropical rainforest on mother Earth and is home to more than half the world’s species of plants and animals.

What would be potential root cause?

Climate change (dry weather, wind and heat), accelerating deforestation, palm oil, cattle, soy and timber are known to be the greatest drivers. Deforestation rates reached startling highs in July. People cut down patches of forest, allow the area to dry out, then burn the remains and might also set fires to replenish the soil.

How is it related to Sustainable Finance?

Norway’s biggest investors, with combined assets under management of USD 170 Billion, Storebrand ASA and pension fund KLP are mapping out which companies may be responsible for any potential damage for the fire. They are talking to companies and intensifying their research to map out who’s responsible for any potential damage. The Swedish government is also reaching out to its pension funds to ensure their investments aren’t contributing to environmental damage in the Amazon.

How is it related to me?

If you are the investors of companies which could directly or indirectly contributing to the forest fire, you should be aware of potential risk of your investment as the biggest investors are going to exit their positions on those companies and it would affect their cost of finance and share price.

Global customers, banks and investors are also giving pressures to companies which might not be sourcing sustainably. Take a look at this interactive report to understand who are sourcing sustainable palm oil so you can make a wise decision when you buy any of your products from them:


Amazon S.O.S. Please help by donating to charities like Earth Alliance – Amazon Fund and  Rainforest Alliance !  

Climate change is FoE’s major advocacy and we really care about Amazon! We have the following four climate related recommendations and works to combat climate change. We look forward to your continued support and participation.

  1. We urge the Brazilian Government to actively tackle the disaster. Countries around the world should adopt a sustainable development model to stop deforestation in the Amazon rainforest.
  2. We urge the Hong Kong Government to increase the green ratio in Hong Kong and create a local “carbon sink”.
  3. We have organised Tree Planting Challenge since 2005. More than 9,300 participants have successfully climbed and planted 83,000 native saplings in various country parks. We are now preparing for “Tree Planting Challenge 2020”, which will be held in Tai Lam Country Park next spring.
  4. We have been delivering professional training to the local stakeholders under the “Jockey Club Smart City Tree Management Project”. In the coming year, we will be arranging more secondary school talks as well as community seminars to enhance their knowledge in trees.

Please refer to the link below to view our press release.