Greening Hong Kong’s Real Estate: Urgent ESG Measures Needed to Combat Climate Change

【Certified ESG Analyst Insights Sharing】Gary Lau, CESGA

With rising sea levels, more frequent extreme weather events, and changing precipitation patterns, the effects of climate change are becoming increasingly evident across the globe. As the world grapples with the challenges of climate change, Hong Kong’s real estate industry is facing a severe threat from climate change. Yet, the industry has been slow to react to the shift. The city’s highly developed urban landscape, combined with its vulnerability to extreme weather events, makes it particularly susceptible to the impacts of climate change. Despite the dire warnings and evident risks, the industry has failed to prioritise climate change mitigation and adaptation measures, and this lack of action could have severe financial and economic impacts to the city.

The impacts of climate change on real estate are multifaceted and can be observed in terms of physical risks and transition risks. One evident physical risk of climate change is the increasing frequency and severity of natural disasters. These extreme weather events can result in extensive physical damage to properties, leading to costly repairs. For example, there were around 500 reports of broken windows during Typhoon Mangkhut in 2018 in Hong Kong.  Several high-rise commercial buildings had their glass curtain walls destroyed, resulting in serious damage to interior units.  According to a report by the Hong Kong government, the total cost of repairing damaged government properties, facilities, slopes, and trees amounted to HK$41 million.

The rise in sea levels is another visible impact of climate change that poses considerable physical risks to coastal real estate. Rising sea levels can increase the risk of flooding, leading to costly damage and threatening the availability of land for development. According to a report issued by China Water Risk, a non-profit initiative based in Hong Kong, it is projected that around 55% of the city’s commercial buildings and 23% of residential buildings will be threatened by a 2-meter rise in sea levels by 2100. By then, 82% of the Hong Kong government’s total revenues will also be affected, creating a significant shock to the city’s real estate and economy.

In addition to physical risks, the escalating insurance premium is one of the transition risks of climate change to the real estate industry. With the expected growth in physical risk exposures and insurance claims due to climate change, the risk-based premium levels will increase over time, potentially impairing the mid-term and long-term affordability and availability of insurance products of properties. To illustrate, Typhoon Mangkhut incurred HK$3.7 billion insurance claims and caused around HK$4.6 billion economic losses in Hong Kong. In view of the exposure to higher costs, there could be a declining market attractiveness in properties located in high-risk areas, resulting in decreased market values and if not, a depressed market environment.

Increasing regulatory focused on climate change could also pose risks to real estate when transiting to a low-carbon economy. When government targets a more sustainable and carbon-free city, new policies and legislations such as stricter disclosure on climate risks and building standards may be implemented, bringing impacts to the real estate industry such as higher project cost. For instance, according to the Hong Kong Institute of Surveyors (HKIS)-funded research conducted in 2016-17 across the globe including Hong Kong, there is a 34.06% increase in capital cost in green building projects on average when compared to conventional building projects.

Despite the pressing need for action, Hong Kong’s real estate industry has been slow to adopt Environmental, Social, and Governance (ESG) practices. Although Hong Kong has made progress in developing ESG policies and practices, it still lags behind regions such as Europe and North America, where there is a greater emphasis on sustainability and social responsibility. The Hong Kong Stock Exchange has introduced several measures to promote good governance practices among listed companies. For example, in 2016, it introduced a requirement for listed companies to publish annual ESG reports including specified mandatory disclosures, and requiring other disclosures on a comply or explain basis. More needs to be done to encourage the widespread adoption of ESG practices in the real estate sector. The industry must embrace ESG practices, adopt green building standards, and make climate change mitigation and adaptation measures a top priority.

In fact, there is no lack of good examples of real estate companies having good ESG practices in Hong Kong. While some companies have made efforts to reduce their carbon footprint and adopt sustainable practices, there is still a need for more widespread adoption of ESG practices in the industry. Despite the launch of BEAM Plus Assessment System and Gross Floor Area (GFA) Concession Scheme since 2010, the adoption of green building practices in Hong Kong has been insignificant with the high initial cost of a green building project being one of the greatest obstacle. 

To address the cost concerns of developers and promote sustainable building practices, the Hong Kong government may consider providing stronger financial incentives such as tax credits, subsidies, and grant apart from GFA concessions. Lessons could be learnt from the United States, where the federal governments and some state governments offer tax credits for buildings that achieve LEED certification and meet certain energy efficiency standards. For instance, corporate tax credits are eligible for LEED Certified commercial buildings with at least 200,000 square feet in New Mexico State. The tax credits help to offset the higher upfront costs associated with green building materials and technologies, making it financially feasible for building owners and developers to pursue LEED certification.

Meanwhile, the Hong Kong government may take references from Singapore’s regulations on green building standards to further promote the development of green buildings. Unlike the BEAM Plus Assessment System, which is optional to application, the Green Mark Certification in Singapore is mandatory for all new building projects. The Green Mark Certification is only valid for 3 years after the issuance date. So, renewal is required before the expiration, ensuring all the buildings achieve the required standards and keep up with the government’s target on sustainability all the time. By 2020, over 4,000 building projects had received the certification, covering 123 million square meters, which represents 43% of Singapore’s total building stock.

Furthermore, Hong Kong government may develop a green mortgage policy to encourage the sale of energy-efficient homes to homebuyers, which would incentivises green building standards and sustainable real estate development. For example, the Federal Housing Administration in the United States offers the Energy Efficient Mortgage programme which offers lower interest rates and higher loan limits to borrowers to purchase homes that meet certain energy efficient standards. A similar policy can also be adopted in Hong Kong by working with banks and financial institutions to offer green mortgages. Hong Kong may develop an energy-efficiency standard for homes and clearly define the qualification of applicants for green mortgages. Government could encourage greater adoption by working with banks and financial institutions to provide education and support to homebuyers on the benefits of energy-efficient homes and the process of obtaining a green mortgage through marketing and public campaigns. 

All in all, Hong Kong’s real estate industry must act urgently to address the challenges posed by climate change. The industry must prioritise climate change mitigation and adaptation measures, embrace ESG practices, and adopt green building standards. Stronger financial incentives from the government and is necessary to encourage the widespread adoption of sustainable practices in the industry. Failure to act could have severe financial and economic consequences for the industry, as well as for the wider society of Hong Kong.


【ESG分析師洞見分享】Ryan Fung, CESGA

日本近年成為全球的焦點,不論是因為外資在過去幾個月一直湧入日本股市,抑或是準備排放經稀釋的核污水到公海,均讓人再次對日本的 ESG 表現關心起來。

在亞洲,日本是最認真看待環境因素的國家之一,在環境披露方面一直是亞太地區和全球領先者,當中焦點是日本的「邁向實現綠色轉型基本方針」(下稱 GX),擬於未來 10 年透過公私融資,達成 150 萬億日元(約合 1.1 萬億美元)投資,改造 22 個工業部門以實現碳中和。

除此以外,日本擬定新設碳交易機制 GX-ETS 以實現碳中和,鼓勵所有在日本經營的公司,無論規模和行業如何,也先自發參與,並籌劃未來如何為該計劃做出貢獻。根據經濟產業省發佈資訊,計劃擬分三個階段引入,先於 2023 年至 2025 年實施自願試驗,第二階段則是從 2026 年起強化試驗規範,第三階段則是在 2033 年正式透過拍賣機制分階段啟動付費市場。

事實上,現時日本已設有東京 ETS 和埼玉 ETS 兩個限額與交易計劃。根據歷史估值數據,每噸碳許可證的平均價格,在 2011 年計劃開始時達到 1 萬日元/噸二氧化碳的峰值,逐漸下降到 2016 年的 1,500 日元/噸二氧化碳和 2017 年的 600 日元/噸二氧化碳。直到 2022 年,價格則一直停滯在 540 和 650 日元/噸二氧化碳之間。

不單止日本有所改變,2022 年是全球碳市場一個多事之年。歐盟就排放交易體系改革達成臨時政治協議,包括將歐盟排放交易體系擴展到海事部門(近日法國更鼓吹對航運業的溫室氣體排放徵收全球稅),並為建築和公路運輸引入第二個排放交易體系。

在北美,美國加州 ETS 和 RGGI ETS(區域溫室氣體倡議)則正評估和審查他們的排放交易計劃,而諾華斯高沙省的總量控制與交易系統將在 2023 年 12 月之後逐步取消。在亞太地區,印度正在努力建立自願和合規碳市場。


在 2021 至 2022 年,除了歐盟排放交易體系、英國排放交易體系、瑞士和紐西蘭排放交易體系除外,大多數碳市場交易價格低於 50 美元/噸,格價差距依然大;至於歐盟 ETS 和英國 ETS 在 2022 年的交易價格甚至近 100 美元/噸。

有研究指出,2050 年要實現淨零排放,所需碳價格到 2025 年估計為 50 美元/噸,到 2030 年增加到 100 美元/噸。在其他地方,IMF 估計需要 75 美元/噸才能實現巴黎協定將全球變暖限制在比工業化前水平高攝氏 2 度的目標。


“SME ESG Best Practices Recognition Programme” Jointly Organised by Dah Sing Bank and Friends of the Earth (HK) Names Commendable Enterprises

(Hong Kong, 18 July 2023) The “SME ESG Best Practices Recognition Programme” (“the Programme”) jointly organised by Dah Sing Bank, Limited (“Dah Sing Bank”) and Friends of the Earth (HK) (“FoE (HK)”) announced today that 19 small to medium-sized enterprises (“SMEs”) have received the Certificate of Recognition for taking the first steps in adopting environmental, social and governance (“ESG”) practices. Coming from the local construction and real estate industry and the retail and e-commerce industry, the 19 commended SMEs received guidance from the Programme’s “ESG Doctor” during the designated period, and managed to enhance their competitive advantages by putting their management resources to good use to practise sustainable development principles in various aspects of their businesses.

Recognising the opportunities and challenges that ESG presents to SMEs, Dah Sing Bank and FoE (HK) joined hands last year to launch this Programme which was the first-of-its-kind in Hong Kong to focus on the construction and real estate industry and the retail and e-commerce industry respectively. The Programme also enlisted the support of a professional “ESG Doctor” to provide free assessment and practical guidance to the participating SMEs. A veteran in promoting sustainable development principles, the ESG Doctor offered invaluable advice to the participating SMEs on how to integrate ESG principles into their business operations. The Programme was well received by SMEs, and after rigorous reviews by its judging panel (“Judging Panel”), 11 SMEs from the construction and real estate industry and eight from the retail and e-commerce industry were confirmed to have achieved significant overall ESG improvements within the designated period.

Ms Phoebe Wong, Deputy Chief Executive, Senior Executive Director and Group Head of Personal Banking of Dah Sing Bank, said, “SMEs form the core of Hong Kong’s economy, yet they tend to lack the know-how and resources to harness the growing significance of ESG. If more SMEs embrace ESG, that will certainly create a meaningful impact on the overall sustainable development of Hong Kong. We are pleased to see that the Programme has successfully inspired a growing number of SMEs over the past year to participate in the transition to a sustainable economy, helped them to recognise the challenges and opportunities in the trend towards a low carbon economy, and to make the necessary strategic adjustments to increase their competitiveness for long-term growth. We hope to see more SMEs embarking on the journey of sustainable development in the future.”

Mr Anthony Cheung, Vice-Chairperson & Green Finance Convenor of FoE (HK), said, “With the urgent need to respond to climate change, it’s crucial that every sector of society steps up to the plate. It’s no longer a question of whether large corporations or SMEs should take action, but rather a matter of when and how they will respond to manage the climate-related risks and opportunities. At the heart of it, SMEs have a unique opportunity to examine their inherent operating models and align them with global sustainable development strategies. SMEs can boost their competitiveness in the post-pandemic market and contribute to the world’s efforts to combat climate change.”

According to the Judging Panel, there is general consensus amongst businesses for sustainable development. However, faced with limited resources, most SMEs mistakenly perceive that ESG principles are difficult to implement. The Programme aimed to increase SMEs’ understanding and awareness of ESG, and to help them embark on their ESG efforts by first identifying the ESG factors of most importance to their businesses, and then by making gradual and systematic improvements. Benefiting from the help and sustained support from the Programme, the participating SMEs were able to enhance their operational efficiency through improvements in such areas as sourcing and procurement, supplier selection, warehousing and distribution, sales procedures, waste disposal, and talent acquisition.

Formed by academics and experts from sectors including public utility, real estate and construction as well as SME associations, the Judging Panel boasts strong rich expertise and experience in ESG. Leveraging the United Nations Sustainable Development Goals (UNSDG) as its framework, the Judging Panel assessed the sustainable development strategies and policies of the participating SMEs and their ability to manage and promote sustainable development performance. Environmental, social and governance performances accounted for 30%, 40% and 30% of the scores, respectively. Environmental considerations focused on energy efficiency and waste management; social considerations stressed on employee health and safety, labour practices and human rights, while governance considerations concerned such themes as board diversity and independence and risk management.

The 19 commended SMEswill become ESG role models for other local SMEs. As Programme organisers, Dah Sing Bank and FoE (HK) sincerely hope that with the support of various trade associations, these SMEs will be able to deepen their ESG knowledge and passion on this sustainability journey, and that they will become torchbearers to accelerate Hong Kong’s sustainable development through collaboration and exchanges to create common benefits amongst various sectors in our society.

List of SMEs Recognised for ESG Best Practices

Property and Construction

Company Name
1Hong Kong BangMang Outsourcing Company Limited
2Hang Kei Engineering Service Limited
3Dehtlet Eco-System Ltd
4York Joint Design & Construction Co., Limited
5Ravia Global Appraisal Advisory Limited
6RHL International Limited
7Brilliant (Man Sau) Engineering Limited
8Riskory Consultancy Limited
9Sun Luen Shing Engineering Limited
10Million Yield Properties Limited
11Kudos Construction Limited

Retail and E-Commerce

Company Name
1Viva Goods Company Limited
2Chill In Mall
3W Cellar Limited
4StoryTaler HK Co Limited
5City Cut Hair & Beauty Salon
6Safe & Sound Solutions Limited
7Crown Gas Stoves (Holdings) Company Limited
8Diving Adventure Limited

Group photos of the awardees of the SME ESG Best Practices Recognition Programme

大新銀行與香港地球之友攜手呈獻 「中小企ESG最佳實踐表現嘉許計劃」嘉許企業名單揭曉

(香港,2023年7月18日)大新銀行有限公司(「大新銀行」)與香港地球之友(「地球之友」)合辦的「中小企 ESG 最佳實踐表現嘉許計劃」(「計劃」)今日公佈,共有19家來自建築及房地產業以及零售及電子商貿業的本地中小企榮獲嘉許證書,以表揚這批中小企踏出環境、社會和管治(「ESG」)實踐的第一步。在計劃指定期限內,這些中小企依照「ESG 醫生」(ESG Doctor)的建議善用管理資源,在不同範疇履行可持續發展理念,提升自身業務的競爭優勢。

大新銀行與地球之友有見 ESG 對中小企帶來的機遇和挑戰,在去年攜手推出全港首個分別針對建築及房地產業與零售及電子商貿行業的「中小企ESG最佳實踐表現嘉許計劃」,並邀請了專業的「ESG 醫生」為參與計劃的中小企提供免費評估與實務指引。該專業「ESG 醫生」在推行可持續發展理念上擁有豐富經驗,為計劃參與者在如何將 ESG 原則融入至公司的業務運營中提供寶貴意見。中小企對計劃的反應令人鼓舞。經過評審委員會嚴格的審核和最後確認,建築及房地產業及零售及電子商貿業分別有11家及8家中小企,在指定期限內,於 ESG 各方面水平均有顯著提升。

大新銀行副行政總裁、高級執行董事兼集團個人銀行主管王美珍小姐表示:「ESG的影響力日增,但中小企往往缺乏相關的認知和資源去應對。作為香港經濟核心,中小企對 ESG 的投入,足以影響香港整體的可持續發展。在過去一年,這計劃積極鼓勵更多中小企參與可持續經濟轉型,認清在低碳經濟趨勢中的挑戰和機遇,為長遠發展提升競爭力及作出策略部署和調整。我們對計劃的成效感到滿意,希望日後有更多中小企踏上可持續發展的征途。」

香港地球之友副主席兼綠色金融事務召集人張振宇先生表示:「應對氣候變化,每一分力量和改變都至關重要,不論企業大小都必須採取行動,管理與應對氣候相關的風險和機遇。ESG可以幫助中小企拓展商機,減少環境風險,提高聲譽。我們相信中小企可以檢視自身的經營模式是否符合環球可持續發展策略,採納 ESG 議題將有助中小企在疫後復常的市場中提升競爭力。香港地球之友致力於支持中小企認識並推動 ESG 議題,創建可持續的未來。」

計劃評審委員會指出,可持續發展理念已是商界共識。然而,中小企礙於資源有限,面對各種 ESG準則,大多都誤以為難以付諸實行。是次計劃旨在提高他們對 ESG的理解和認知,並協助他們踏出 ESG工作的第一步,先選定對其業務至關重要的 ESG因素,再按部就班地推展改善工作。在這次計劃的協助和持續支援下,參與計劃的企業均完善了貨源採購、供應商選擇、倉儲和配送方式、銷售程序、廢料處置、以及人才吸納等環節的管理,提升企業的營運效益。

計劃的評審委員會由學術界、公用事業、地產和建築、中小企業協會等行業的專家組成,他們在ESG 領域具備專業知識和經驗,並以聯合國可持續發展目標(UNSDG)為框架,評估中小企的可持續發展策略、政策及其管理和推動可持續發展績效的能力。環境表現在評分中佔30%,社會表現和管治表現則分別佔40%和30%。環境方面主要關注企業的能源效率及廢物管理等議題;社會方面主要關注員工健康與安全、勞工實務和人權等議題;管治方面則關注董事會多樣性和獨立性、及風險管理等主題。

獲嘉許的19家中小企將成為本地中小企履行 ESG 的典範。計劃主辦方大新銀行及地球之友期望他們能夠在各大商會的支持下延續其 ESG 旅程,繼續提升對ESG的認知及熱誠,並致力推廣至各行各業,一起攜手協力、互相交流,促進社會各界互利共贏,加快香港的可持續發展。



8Riskory Consultancy Limited


6Safe & Sound Solutions Limited


Who Wins

Mostafa Monira Firdouse. Green Finance Advisor, Friends of the Earth (HK)

We all know a huge amount of financing is needed to tackle climate change. By now, we already have some of the technology to facilitate climate change combating investments and some level of understanding of the requirement of financing needed. 

Global landscape of climate finance and climate tech innovation
The past decade saw growing momentum, where public and private climate finance almost doubled between 2011 and 2020.

Climate tech also gained its momentum. Innovations include solar, wind, and nuclear energy as well as novel energy storage systems and clean grid applications. The agriculture sector is optimizing resource utilization through precision farming, agricultural robotics, and vertical farms. Sustainable mobility is also gaining popularity to mitigate dependence on fossil fuels. To decarbonize the mobility sector, companies are transitioning to electric vehicles (EVs) and micromobility. Circular economy and low-carbon manufacturing follow sustainable mobility and maximize material usage. Sustainable land and water management, carbon data and analytics, carbon capture, utilization, and storage (CCUS), and green construction are the other trends in the climate innovation ecosystem. Climate Techs

Despite all this, we keep failing to achieve job targets, scale-up climate change innovation and tackle temperature rise and the food crisis. Our defeat in these areas will ultimately generate socioeconomic catastrophe.

As Mia Mottley said during her interview in Tianjin; “The problem is that there is a serious disparity in the pricing of capital between the global north and the global south… We therefore have to start where we can make meaningful progress, and we believe that it is in the area of finance.”

What’s missing?

  • Financing need: How much financing is needed to tackle climate change? According to IMF, financing needed to meet adaptation and mitigation goals are estimated at trillions of US dollars annually until 2050.
  • Missed target: In 2009, high-income countries pledged to deliver $100 billion a year by 2020 to help poorer countries reduce emissions and prepare for the effects of global warming. How much has been disbursed so far? (Explained in graph).
  • Climate Action: Not all human populations are equal in the face of the climate challenge. Paradoxically, the poorest countries are often those most affected by uncontrolled global warming.

Despite 30 years of global climate advocacy and diplomacy, the international system has struggled to make the required progress on climate change. A failure to mitigate climate change is ranked as one of the most severe threats in the short term but is the global risk we are seen to be the least prepared for. GlobalRisksReport2023

In summary

The impacts of climate change will not be borne equally or fairly, between rich and poor, women and men, and older and younger generations. However, “Climate change is happening now and to all of us. No country or community is immune,” said UN Secretary-General António Guterres. “And, as is always the case, the poor and vulnerable are the first to suffer and the worst hit.”

The transformation needed to limit global warming to 1.5°C needed enabling conditions that reflect links, synergies, and trade-offs among mitigation, adaptation, and sustainable development.

Beyond climate-related externalities, there are others, these include 

  • Information asymmetries related to taxonomies and large data gaps, 
  • Absence of common taxonomies, 
  • Inadequate classifications for sustainable investment, home bias considerations, and an overlay of other risk factors and externalities.
  • Among data gaps, developing weather monitoring and forecasting systems is important especially for LICs, which are heavily reliant on agriculture. Such externalities create significant barriers for private sector climate investment and effective capital reallocation. 
  • The introduction of carbon border adjustments in some countries can boost other countries’ incentives to adopt similar policies and tax carbon domestically, which could accelerate the transition.