Alexandra Tracy, Green Finance Advisor of Friends of the Earth (HK)
In his blog post in late January (31 Jan 2021), the Financial Secretary, Paul Chan Mo-po, described a number of government initiatives on climate change policy, hailing the opportunities for Hong Kong to “grasp the development potential brought by this Green Wave”.
Absolutely so. But in the green finance area this must go far beyond issuing some more government green bonds. As we have noted, investor appetite for Hong Kong paper is strong. Highly rated sovereign entity issues bond – so no surprise that people want to buy it – but does it really move an entire market ?
Some of our largest financial institutions are already big players in the green finance game. In 2019, HSBC became the largest underwriter of green, social and sustainability bonds globally. Despite the disruption and challenges for business in 2020, HSBC has remained in the top ten of global bond underwriters.
The opportunity for the government is not simply to keep telling us about what these great international companies are already doing – although the fact that they are doing some of it in Hong Kong is clearly good. The challenge for government is to craft sensible policies and prudent investment that will catalyse activity in all the other financial institutions in Hong Kong – a very sizeable number – that are not currently in the game.
This should be top of the agenda for its Green and Sustainable Finance Cross Agency Steering Group. How can government effectively move the broader market in a greener direction ? What actions by government could create a positive demonstration effect highlighting the potential for low carbon and climate resilient businesses and the feasibility of financing them on acceptable terms ?
Part of this has to be about sending clear messages, which are not muddled up with environmental platitudes. Hong Kong investors and lenders need to hear a strong commercial argument for why they should spend time and allocate resources to developing new business lines. If banks can be convinced that lending to – say – energy efficiency is low risk enough and lucrative enough, they will probably consider it.
As Paul Chan says in his blog, getting this right could create opportunities and jobs across the economy in Hong Kong.
Growing the pool of capital available to green businesses increases the number of projects that can be financed, which increases revenues and profits for local construction, technology and supply chain companies. Availability of financing on reasonable terms could provide Hong Kong companies with a competitive edge when bidding for projects overseas. And Hong Kong is well positioned to establish a cluster of expertise in the tech services which need to go alongside green financing activities: monitoring, reporting, verification, risk management and so on.
The potential rewards that come from grasping the “green wave” are substantial. It is time that all our financial institutions are encouraged and enabled to share in them.
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