Month: December 2022

Alexandra Tracy, Green Finance Advisor of Friends of the Earth (HK)

Hong Kong is one of the world’s most densely populated places, with most of its more than 7.4 million residents living and working in high rise buildings. Hong Kong’s major source of electricity consumption is its buildings, which account for around 90 percent of total consumption, compared to a global average of 39 percent. This high level of energy consumption by buildings accounts for 60% of the city’s greenhouse gas emissions. Greening the building stock, therefore is an essential part of achieving Hong Kong’s carbon reduction targets.

Increased availability of sustainable finance products is crucial to enable the development of greener and energy efficient buildings. Some of Hong Kong’s largest property companies, such as Swire Properties, Hong Kong Land and Sun Hung Kai Properties, have already raised funding from green bonds and loans. More recently, individual home owners in Hong Kong can also access sustainable financing in the form of green mortgages.

What is a Green Mortgage?

Green mortgages provide funding to home owners to purchase an energy efficient property, which meets stipulated environmental standards, or to make sustainable and eco-friendly upgrades to an existing home. They offer favourable interest rates, repayment terms and other incentives to encourage green home improvements. For new mortgages, lenders may also take future energy savings into account, so a larger loan can be available without a bigger down payment. Alternatively, a green mortgage could be rolled into a home owner’s existing mortgage to finance upgrades.

Green mortgages offer benefits to both borrowers and lenders:

• Energy efficient homes cost less to power, reducing utility bills and realising cash savings for borrowers, which in turn make them less likely to default on their mortgage loans, reducing the bank’s credit risk.

• Growing demand for more sustainable homes means that energy efficient improvements may increase the value of the property over time, which is positive for the home owner and reduces the bank’s asset risk.

Hong Kong’s Green Building Standard Paves the Way

As part of Hong Kong’s Climate Action Plan 2030+, which contains a carbon intensity reduction target of 65-70% by 2030 compared to the 2005 level, the government has introduced green certification standards, designed by the Hong Kong Green Building Council. To meet its BEAM Plus standard, building developers must meet a comprehensive set of sustainability performance criteria ranging from planning and construction to the fitting out, operation and maintenance of the building. Buildings are rated bronze, silver, gold or platinum according to their delivery against the criteria.

More than 1,600 buildings and development projects in Hong Kong already have a BEAM Plus certification, which has paved the way for the development of the first green mortgage products in Hong Kong.

Hong Kong Green Mortgage Programmes Launched

In September 2021, the first green mortgage plan was launched in Hong Kong by Bank of China (HK) in partnership with Sino Land. Under the plan, paperless and digital mortgage services were made available to purchasers of Sino Land four residential projects that received the BEAM Plus Platinum or Gold rating, giving them a lower carbon footprint compared to the typical mortgage application process. In addition, borrowers received a cash reward, a premium fee waiver on the home insurance plan and other digital wealth management rewards. Bank of China (HK) has extended the scheme to a number of other developers, with several thousand units available for sale.

Over the last year, several of Hong Kong’s largest banks have developed their own green mortgage plans tied to BEAM Plus building certifications. For example, Bank of East Asia’s offering is available for purchase or refinancing of new and second hand housing with BEAM Plus Platinum or Gold ratings. Borrowers receive a preferential mortgage interest rate and other incentives, such as a cash rebate and an attractive deposit savings scheme. In addition to generous cash rebates, HSBC is even seeking to attract borrowers under its green mortgage plan with prizes such as a Tesla electric car !

The Future is Green Mortgage Securitisation

Securitisation is a process whereby banks transform a pool of illiquid financial assets, such as mortgages, into tradable financial instruments, known as asset backed securities. This enables a bank to sell its pool of mortgage assets to institutional investors, thus freeing up its balance sheet and generating new lending capacity.

There is growing institutional demand for securities where the underlying assets are themselves defined as sustainable, such as green mortgages on certified buildings. Sales of green mortgage backed instruments have seen significant growth in the United States and Europe.

The volume of green mortgage assets in Hong Kong is currently too low to support securitisation deals, but is likely to increase rapidly over time. The Hong Kong Mortgage Corporation, which provides mortgage insurance cover to local banks and is responsible for promoting the development of the mortgage backed securities market in Hong Kong, is already considering ways to encourage issuance of green asset backed securities in the city.

Green Finance Advisor of Friends of the Earth (HK)

As ESG standards are becoming a default consideration when performing investment evaluation, it is becoming increasingly evident that developed market companies have benefitted more from the broad application of ESG standards than others. Aside from the old fossil fuel industries and materials, developed market companies have broadly benefited from lower capital costs as a direct result of generally higher ESG scores, which led to institutional investors directing more of their capital towards these companies. However, it is worth analyzing why developed market companies typically receive higher scores.

Developed markets are typically associated with a higher score for social and governance, with legal codes protecting labor rights and providing certain minimum levels of benefits, and smaller numbers of privately controlled public companies and thriving institutional shareholder activism, are some of the few perceived factors that make developed market companies seem to be better stewards of social and governance factors. It is also worth noting that some of the companies that score highest in ESG ratings are usually technology companies such as Apple, Google and Microsoft, which typically do not have high requirements for manual labor.

Having considered this, we should perhaps now ponder whether it is justified that developed market companies should enjoy this higher ESG score, and thus cheaper capital, compared to their emerging market counterparts. We should consider questions such as: (I) are these ESG criteria designed to support Western values or do they indeed drive better social and governance responsibilities not only for Western citizens but for the global population? (II) Are these ESG criteria a fair assessment given countries that are in different developmental stages, where perhaps in certain emerging market economies, the labor force would prefer the opportunity to earn a wage than be patronized with labor rights protection? (III) Do these ESG criteria penalize emerging markets who require energy intensive industries to reach the next developmental stage, and while developed markets have been polluting the world for over 150 years to drive their own development and yet have not been penalized? (IV) Is the Western model of governance the ultimate standard when there have been spectacular corporate failures such as Lehman Brothers and Enron, each the trigger of a global financial crisis?

ESG is without doubt the future of the corporate world as we must address the imbalance between capital versus labor, and ESG standards will help balance powerful corporates with the appropriate protection afforded to individual workers, especially since the imbalance has been further exacerbated by the pandemic. However, we as responsible finance advocates sitting at the crossroads between emerging China and the West owe it to ourselves to influence and provide input to ESG standards to ensure it doesn’t become another tool for the West to impose its ideology on China by unfairly disadvantaging Chinese companies based on lower ESG scores (and thus higher capital cost) benchmarked against purely Western standards without regard to economic and social realities in China. Further, we must also fight against unscrupulous Western interests in disguising ESG as a protectionist tool by granting developed market companies a higher ESG score on the sole basis of their conformance with Western values, which gives them an unfair advantage in access to capital. This in itself is anti-competitive behavior and should be viewed negatively within the context of ESG.

In a year where we have been upended by war in Europe, high inflation and high interest rates, we must also rebalance our thinking to ensure the current Western hegemony in technology, wealth and capital does not become even more powerful by appropriating ESG as their protectionist tool. We should fight against this by influencing ESG standards such that emerging markets also have a fair chance of development and not fall into the middle income trap because of a lack of capital as constrained by Western centric ESG standards. The time to act is now before ESG standards mature and it will be too late to change then.

香港地球之友副主席及綠色金融事務召集人張振宇先生

近年，香港愈來愈多機構和企業舉辦有關可持續發展的論壇和活動講座，明顯印證著各界愈趨關注具可持續的未來願景。這些活動讓大家能聚首交流ESG上的知識和經驗，連結各界，締造合作和協同努力的機會。

在12月12日，香港地球之友與歐洲金融分析師聯合會（EFFAS）和香港生產力促進局（HKPC）合作舉辦了「碳中和論壇 2022暨環境、社會及管治分析師認證（CESGA）頒獎典禮」，吸引了各行各業人士以實體或網上方式參與，台上台下熱烈交流。

本次碳中和論壇還有一項特別環節—— CESGA 頒獎典禮。CESGA為歐洲金融分析師聯合會（EFFAS）建立的國際認證資格，內容全面涵蓋企業及金融機構ESG從業人士所需的相關範疇。香港地球之友為鼓勵年輕人貢獻於綠色金融和可持續發展，設立「地球之友ESG獎學金」，及邀請其他贊助者，以獎學金形式資助獲獎者在報讀 CESGA 的費用。在本次CESGA 頒獎典禮中，便有三名傑出的學生和年輕專業人士獲頒授獎學金。很高興碳中和論壇更獲得多位 CESGA 校友撥冗出席，見證本次盛事，慶祝成就。

而論壇後本會更迎來一個令人振奮的消息，香港地球之友大力推動的環境、社會及管治分析師認證（CESGA）以及由本會開辦的《綠色金融及ESG投資分析行政文憑課程》成為香港金融管理局「綠色和可持續金融培訓先導計劃」的首批合資格培訓課程及專業認證(https://www.greentalent.org.hk/)。

先導計劃涵蓋非金融服務從業員以及大學生等準從業員，此舉極具前瞻性，我相信有助香港培育世界級綠色金融人才。此外，申請人可獲發還 80 %的相關費用（而全日制學生發還費用更可高達100%），無疑能大大激勵年青人積極進修，從中提升綠色金融專業知識。

本會將會繼續不遺餘力，積極向業界及公眾推廣ESG和綠色金融課程，加快培育本地綠色金融人才，推動低碳和可持續發展的經濟轉型。在論壇中遇到許多充滿活力和熱誠的 CESGA 校友，再次鼓舞我們所作的努力。我希望看到更多有抱負的人加入我們邁向零碳未來的征途。

我謹祝所有讀者聖誕快樂，新年進步！

Mr. Anthony Cheung, Vice-chairperson & Green Finance Convenor of Friends of the Earth (HK)

In recent years, more and more institutions and corporates organised forums and seminars with topics related to sustainable development. It obviously shows that different sectors are paying more attention to the vision to build a sustainable future. These events gather and enable us to exchange our ESG knowledge and experience, connecting each party, and creating opportunities for cooperation and collaboration across sectors.

On the 12^th of December 2022, Friends of the Earth (HK) partnered with the European Federation of Financial Analysts Societies (EFFAS) and the Hong Kong Productivity Council (HKPC) to host the Carbon Neutrality Forum 2022 and Inaugural CESGA Award Ceremony. Participants across industries attended physically or virtually. It sparked intense thought exchanges both on stage and off the stage. We also had the Inaugural CESGA Award Ceremony as one of the featured sessions of this Forum.

CESGA is an internationally accredited certification established by the EFFAS. The CESGA programme is a comprehensive tool made by professional practitioners and scholars which covers all relevant topics that an ESG expert needs. Acquiring CESGA certification is a milestone for candidates who are equipping with ESG knowledge. To encourage the youth’s contribution to sustainable finance and ESG development, Friends of the Earth (HK) established the “Friends of the Earth ESG Scholarship” and has also invited other sponsors to get involved. The scholarships subsidise the awardees’ CESGA study fees. In the CESGA Award Ceremony, three CESGA Scholarships were awarded to three outstanding students and young professionals in the CESGA Scholarship Programme 2021/22. I am delighted that many CESGA alumni attend this Forum to witness the event and celebrate their achievements together.

Friends of the Earth (HK) is honoured to learn both the Friends of the Earth (HK) actively promoting EFFAS CESGA programme and our Executive Certificate Course in ESG Analysis & Green Finance Valuation have been approved as one of the Eligible Programmes under the Pilot Green and Sustainable Finance Capacity Building Support Scheme, (https://www.greentalent.org.hk/) after the Forum. 

The scheme is open for application by Hong Kong residents who are market practitioners and prospective practitioners of green and sustainable finance. This is certainly forward-looking. It will help Hong Kong cultivate top-notch green finance talents. After completing eligible programmes, applicants can apply for a subsidy of up to 80 per cent of the relevant fees (up to 100 per cent for full-time student applicants), subject to a ceiling of $10,000. It certainly will encourage the youth to engage in learning, improving their professional green finance knowledge.

Friends of the Earth (HK) will continue to actively promote ESG and green finance courses to industry practitioners and the general public, in order to accelerate the cultivation of local green finance talents, and to promote the transformation of a low-carbon and sustainable economy. We met many energetic and passionate CESGA Alumni in the Forum, which reaffirmed our passion and efforts. I look forward to more aspirants joining the zero-carbon future journey. 

Friends of the Earth (HK) partnered with the European Federation of Financial Analysts Societies (EFFAS) and the Hong Kong Productivity Council (HKPC) to host the Carbon Neutrality Forum 2022 and Inaugural CESGA Award Ceremony, attracting participants across industries to attend physically and virtually. In the forum, the panel discussion, which was sponsored by Hang Seng Indexes Company Limited, gathered experts from different ESG fields related to green investment and green products to share their insights in aligning investment with the global climate goal.

Mr. Anthony Cheung, the Vice-Chairperson and Convenor of Green Finance of Friends of the Earth (HK), mentioned in his welcoming remarks that, “The world has an important mission to address climate change and carbon reduction, and to promote a cleaner, greener and more sustainable lifestyle in order to achieve harmony with nature. Today’s event is a timely opportunity to hear from a broad range of experienced practitioners about the challenges they face in aligning investment with global climate goals.” Friends of the Earth (HK) is honoured to learn both its Executive Certificate in ESG Analysis & Green Finance Valuation and the EFFAS CESGA programme have been approved to be part of the first batch of the Eligible Programmes under the Pilot Green and Sustainable Finance Capacity Building Support Scheme, (https://www.greentalent.org.hk/) after the forum. Mr. Cheung emphasised Friends of the Earth (HK) will continue to actively promote environmental, social and governance (ESG) and green finance courses to industry practitioners and the general public, in order to accelerate the cultivation of local green finance talents, and to promote the transformation of a low-carbon and sustainable economy.

Mr. Joseph Chan, JP, the Under Secretary for the Financial Services and the Treasury of the Government of Hong Kong SAR and officiating guest of the forum stated, “In the process of green transformation, there is accelerating demand for green finance. We strive to develop Hong Kong into a regional hub for green and sustainable finance, serving as a premier financing platform for international and Mainland green enterprises and projects in raising funds through issuing bonds, funds, initial public offerings, loan syndication and other channels.”

As one of the co-organizer of the event, Dr. Lawrence Cheung, Chief Innovation Officer, Hong Kong Productivity Council presented his opening speech mentioning, “To achieve Hong Kong’s carbon neutrality goal by 2050, HKSAR Government has set out the vision in the Hong Kong’s Climate Action Plan 2050 last year, outlining four major decarbonisation strategies. Meanwhile, private enterprises have been increasing investment in decarbonisation and carbon neutrality initiatives. Therefore, HKPC has been sparing no effort in assisting Hong Kong industries and enterprises to define and execute their carbon neutral strategies and initiatives. We will continue to work alongside the industries and enterprises to strive towards the goal and build us a sustainable future.”

The Inaugural CESGA Award Ceremony was conducted successfully and gave recognition to the CESGA community in Hong Kong. Three CESGA Scholarships were awarded to three outstanding students and young professionals in the CESGA Scholarship Programme 2021/22. Ms. Chung Sum Yue​ received the Friends of the Earth CESGA Scholarship. Mr. Lau Yiu Lung Peter​ and Mr. Ho Wai Yiu Ryan received the Towngas China CESGA Scholarships. Two awardees came to receive the certificates presented by Mr. Joseph Chan, JP. The Ceremony also gathered dozens of CESGA alumni across industries to celebrate their achievements with Mr. Joseph Chan, JP.

ESG investing rose from a niche segment ten years ago and became the mainstream. It shows that ESG goals are not merely a “nice to have” for investors or a means to show their commitment to sustainability anymore, but become an element of their investment strategies. In view of this, the panel focused on the investment strategies and product landscape change over the years, how investment decisions in alternative investment consider climate-related risk and opportunities, and the gaps between investors & corporates in climate-related investments. It is our honour to have Ms. Taie Wang, the Chief Sustainable & Emerging Business Officer from Hang Seng Indexes Company Limited, Ms. Judy Wang, the Managing Director,​ Regional Head, Portfolio Analytics and Monitoring Asia,​ Global Credit Markets Financial Markets from Standard Chartered, and also Mr. Brian Liu, Senior Portfolio Manager and Head of Alternative Investment​ from China Life (Insurance) Overseas​ at the panel discussion to share their insights regarding the green investment alignment and green finance education in Hong Kong.

The ESG field, including green financing, green investment, ESG reporting and community communications, requires a lot of ESG expertise. In her closing speech, Ms. Ophelia Lin, Vice-Chairperson of Friends of the Earth (HK), stated, “The shortage of ESG and sustainable development talents is a major obstacle to carbon neutrality. In order to meet the increasing demand for talents, Friends of the Earth (HK) has dedicated itself to building capacity for industry practitioners and the general public towards green finance.” She added, “Meeting many energetic CESGA alumni here reaffirms our passion. ‘Scramble for talent’ and ‘talent war’ have become buzzwords recently. However, for the sake of the Earth and our society, this should not be a zero-sum game, we only have the climate crisis as our enemy. We can incubate and nurture our own talents to serve our carbon neutrality mission.”