TCFD means Task Force on Climate-Related Financial Disclosures which provides a framework for companies to provide information to investors, lenders, insurers, and other stakeholders.
Support for the TCFD has grown to 792 organizations as of June 2019. In Hong Kong, some noticeable additions of TCFD supporters are: Hong Kong Monetary Authority in May, Hong Kong Exchanges and Clearing Limited in June, followed by Securities and Futures Commission in July.
What could be the reasons of a sudden surge of interest in this area?
The answer is simple – Climate change is real (See https://climate.nasa.gov/), and we all need to be prepared for the risk, and look out for opportunities!
But how can we identify the climate change risk impacting us – as an individual, or corporate, or investor, or lender?
The key is data disclosure! Without data, we cannot make sound decision to identify potential threats to us, and start to mitigate and manage the risk; nor can we identify other opportunities which could help us to build business resilience or protect our investments. There are plenty of resources to help you with TCFD Disclosure (https://www.tcfdhub.org/).
It also starts with your awareness and commitment, stay tuned with our Green Finance Blog and let’s walk this journey together for a more sustainable future!
Friends of the Earth (HK) 【FoE (HK)】today pledges to Green and Responsible
Investing, divest in fossil fuels and to promote climate responsive investing.
Climate Change and Decarbonisation are FoE (HK)’s
major advocacy focus. Charity starts at home, FoE (HK) believes its pledge to
sustainable treasury management is an effective response to mitigate climate
It also hopes to lead by example to catalyse
other charities and NGOs to consider ESG (Environmental Social Governance)
“Do Less Harm. Do More Good. Decarbonise
Philanthropy is the best way to repay the generosity of donors and to safeguard
a resilient environment for our future generation. Earth is tolerant. Youth are
impatient. ESG Investing could be a remedy to neutralise social and ecological
imbalance and conflicts. Social harmony could be redeemed by restorative
economy and eco-socio enterprise,” said Mrs.
Mei Ng, Chairperson of FoE (HK).
FoE (HK) is also honoured to have Dr. Jimmy Chang, Associate Director-General
of InvestHK as our officiating guest. He said, “With strong government
commitments, a great pool of finance and legal talents, as well as tremendous
opportunities arising from the Belt & Road Initiative (BRI) and the Greater
Bay Area (GBA) development, Hong Kong is well positioned to develop itself into
a premier green finance hub not only in the region, but also in the world.”
At the “Green Finance Connect” launching
ceremony today, FoE (HK) made an official pledge:
ESG investing and decarbonise charity
(2) Conduct research on green finance
(3) Incubate green finance human capital
for Hong Kong
“Green Finance Connect” launch kickstarted FoE
(HK)’s Green Finance Advocacy Roadmap. Regular roundtables, dialogues and
workshops will be organised to catalyse stakeholder and business sector
A “Green Finance Blog” has been set up to
facilitate sharing of insights, info, trends, ideas and case studies, about
‘everyone has the ability and option to invest in Green’.
FoE (HK) will commit to take the following actions:
for Principles of Responsible Ownership adoption
FoE (HK) pledged to
fully adopt the Principles of Responsible Ownership (“Principles”) issued by
the Securities and Futures Commission (SFC) in 2016, and would also advocate
all asset owners, endowments, charities and foundations to align their
investment policies with the Principles.
(HK) as a pioneer and leader in Green and Responsible Investing
As of June 2019,
Hong Kong Monetary Authority (HKMA) is the only asset owner in Hong Kong
pledged adoption of the Principles and FoE (HK) is proud to be the first NGO to
do the same.
Green Finance Human Capital
FoE (HK) would advocate industry
practitioners about the importance of green finance and ESG investing. We would
also work with Centre for Economic Sustainability and Entrepreneurial Finance
(CESEF) at The Hong Kong Polytechnic University (PolyU) to incubate green
finance human capital with the “ESG Investment Education Pledge”.
Louis Cheng, Director of the CESEF of PolyU, told the audience, “This ESG Investment Education
Pledge aims to show case FoE (HK)’s financial commitment among NGOs in Hong
Kong and to push for sustainability through ESG investments education. Such a
pledge helps School of Accounting and Finance at PolyU to educate its students
about ESG and its importance through investment research for the Pledge.”
This will enable PolyU students at the
School of Accounting and Finance to conduct research on the HK$10m Green and
Responsible Investment Portfolio (GRIP).
FoE (HK) is pleased and honoured to enlist
the professional support and service of the global wealth and asset manager Lombard
Odier to manage the fund and to mentor the PolyU students in their research.
Nakamura, Chief Investment Officer Asia and CEO Hong Kong, Lombard Odier, said, “Sustainability represents for
Lombard Odier the biggest investment opportunity of our century. Throughout our
223-year history, Lombard Odier has embraced a sustainable approach in managing
our clients’ money, consistently rethinking our socially responsible investment
methodologies and tools. We are proud today to support FoE (HK) and CESEF in
their efforts to promote an inclusive way to manage money, accelerate the
necessary changes in business practices and value more sustainable business
ESG or green investing has undeniably become mainstream in recent years. Despite the continuous debates in the market, it is getting clear that ESG or green investing does no harm.
If you think investing in ESG or green considerations will sacrifice your investment returns, it is the time to think twice.
More academic studies and industry research papers have been addressing to this related topic. According to Stanford University, investors increasingly prioritize climate finance and look for investment opportunities that offer “high returns with high environmental impact.” “After analyzing 74,486 observations of U.S. firms from January 2005 to December 2015, we find that such investment opportunities do exist”. Meta-study by Oxford University also found that in 90% of cases they analyzed environmentally efficient companies have lower costs of capital (both equity and debt) and that eco-efficient and environmentally responsible companies show superior stock market performance. Another industry report also concluded that “increasing exposure to ESG rarely underperforms the market, and often outperforms the market”
It is important to note ESG or green investing would be decomposed into different elements, from underlying data points, ESG rating to investment construction methodology. It would be overly simplistic for one to conclude ESG or green does or does not provide alpha (outperformance) without carefully study each fundamental element.
I guess the baseline here is, ESG doesn’t mean sacrificing returns while it does help you to manage risk as they tend to translate into lower volatility. As global investors are now getting at the forefront of climate change, perhaps it is also the time for you to embrace ESG or green investing.
Credit Agricole, a major global financial institution, recently announced that it will walk away from financing the coal sector — not only the miners but also power plants and infrastructure for coal transport. Credit Agricole is not the first to say no to coal. According to Institute for Energy Economics and Financial Analysis (IEEFA), over 100 global financial institutions have already cut back the funding support for coal. (Click here for the report)
The reason for stopping coal is simple — the true cost of coal is high. We are not only talking about the direct measurable cost of getting it out of the ground but more importantly the consequence of damaging the ecosystem and all the cost of burning coal. The carbon releases to the air is among the major source of climate change. With better technology, we can now generate cleaner energy at lower cost. Powering our world without coal is becoming more real.
While coal is still its key source of power, China has been actively diversifying into alternative energy — it is already the world’s largest solar and wind power producer. Hong Kong has been slow in reacting but is catching up. Last year CLP introduced a scheme (Click here for the details) to buy electricity generated by renewable energy. In other words, households and companies can not only reduce their electricity bills but also make good income by installing their own solar power system and sell to CLP. Since then solar power has expanded rapidly in Hong Kong.
This is what we, green finance advisors would like to see. This is what green financing is about — putting capital to build a sustainable world.
Serena Mak, Green Finance Advisor of Friends of the Earth (HK) / Serena Mak, 香港地球之友綠色金融顧問
If we look
beyond Hong Kong, the topic of Green Finance is picking up momentum globally. Governments
are putting up measures such as initiatives to incentivize green investing or
laws & regulations that penalize corporations that are negatively impacting
the environment. In the private sector, it can be seen that green investments
can generate good returns, which is encouraging to see. Apart from products
such as Green Bonds, China is also engaging in innovative ways to ‘monetize’
the effect of business to the environment, such as the first China Emissions
Exchange located in Shenzhen which was established in 2013 and is trading
‘emission allowances’ for carbon dioxide.
mentioned by the various interviewees in one of our inaugural blog videos,
there is a great need for international collaboration across boundaries to
promote the topic of Green Finance. Few examples include the setting up of the
US-China Green Fund which is supported by both the US and China government, and
also the recent collaboration between the French Development Agency (AFD) and a
as one of the world’s biggest financial markets has a unique opportunity to
also promote cross-border collaboration to further expand its footprint in the
Green Finance space.
opinion article about emission trading system can be found here:
Special commissioned by Alexandra Tracy, President of Hoi Ping Ventures / 特約撰稿Hoi Ping Ventures主席 Alexandra Tracy
Green finance in Hong Kong has really started to take on some momentum over the past few months, with a raft of announcements from policy makers which will have an impact across a range of financial sectors.
In a bold signalling move, Hong Kong has become the first Asian government to sign up to the Green Bond Pledge, while issuing its first tranche of sovereign green bonds in May. In a similar vein, the Hong Kong Monetary Authority will reportedly soon become a signatory to the United Nations Principles of Responsible Investing, and is looking at joining the central banks’ Network for Greening the Financial System.
More tangibly, on the ground, HKMA has also announced a new sustainable bank initiative for Hong Kong banks, aiming to push them towards greater “greenness” and will create a Centre for Green Finance to provide technical assistance. On the investment side, HKMA’s Exchange Fund is looking to incorporate more ESG principles into its activities, while the Securities and Futures Commission and the Hong Kong Stock Exchange are looking to heighten ESG disclosure by listed companies and fund providers.
So, green finance in Hong Kong is moving forward, and this is a good thing. Financial markets must evolve to keep ahead – Hong Kong can’t play the “offshore RMB” card for ever – and competence in this area is likely to be essential to maintaining global market competitiveness.
What is green finance for?
But let’s look at the bigger picture for a moment: not so much, “what is green finance?” (and how do we get really good at it ?), but also, “what is green finance for ?”
There is a huge demand for financing for green and sustainable development, infrastructure and business. Trillions of dollars need to be invested in our region every year to achieve the Sustainable Development Goals. Construction of cclimate smart infrastructure alone in developing Asia is likely to cost nearly US$2 trillion annually.
Much of that investment, over time, will increasingly come from so called “mainstream” investors, as we see business practices shifting towards more green and sustainable norms. Where green finance is needed – in the short to medium term – is to fill market gaps and to fund projects and businesses that traditional fund managers and banks currently won’t touch.
When this is done correctly, it can be incredibly powerful and transform local markets.
For example, the Connecticut Green Bank in the US has implemented one of the most successful commercial building energy efficiency programmes in the world, creating a structure for long term financing of energy upgrades, which was not then available from banks in the state. The positive performance of loans under the programme has since attracted several private funders into this sector.
Similarly, the Indian Solar Loan Programme transformed the market for solar home systems in Southern India from a small, cash only business into a thriving sector which was able to attract significant bank capital. With initial support from the UN, local banks could become familiar with the potential risks of funding solar and appreciate the opportunities in this growing business line. They are now lending on purely commercial terms.
Transforming business as usual
Green finance plays a crucial role in financing businesses that struggle to raise funding from traditional sources. Its value lies in transforming “business as usual” – enabling green and sustainable activity that might not otherwise be able to succeed.
At the same time, green finance is itself a business, which can generate substantial rewards both for its proponents and for the wider economy. Growing the pool of capital available in Hong Kong to green businesses will create new opportunities for the financial services sector, as well as supporting the low carbon technology, construction and supply chain sectors.