Few would question China's leadership in promoting green technology and green energy. Solar photovoltaic installations are growing on pace to add 85% of global generating capacity by 2025. China is currently installing more solar panels in more large-scale projects than the rest of the world combined. Meanwhile, China has taken the global electric vehicle (EV) market by storm as the world's largest producer of EVs, with BYD overtaking Tesla to become the world's top EV manufacturer. On the road, 45% of all cars in China are electric, compared with 25% in Europe and about 11% in the United States, according to the International Energy Agency.
Building on this momentum, Hong Kong faces a great opportunity to contribute to advancing the region's net zero goals as an international technology hub for China and a bridge to other Asian countries. By working with China and following its path, Asia can achieve rapid transformation in energy and other key sectors, and have a positive impact on the global climate change challenge.
“Asia is ideally positioned to rise to the challenge of leading the global net-zero transition,” urged Pom-man Lo, founder of the Institute for Sustainable Technology (IST) and organizer of the inaugural One Earth Summit, held in Hong Kong in late March. She and other industry leaders echoed the sentiments of Hong Kong Chief Executive Lee Ka-chiu, noting that Hong Kong's traditional financial strength and burgeoning capabilities as an innovation and technology hub make it an ideal place to build partnerships to advance innovative solutions that foster sustainability.
The inaugural One Earth Summit held in Hong Kong was a unique collaboration between governments and IST-led NGOs, with a clear focus on climate action and impact to bring about real change. The event was co-hosted by the World Economic Forum's Giving to Amplify Earth Action (GAEA) group and endorsed by global sustainability leaders including WEF founder Klaus Schwab, global investment titan Ray Dalio, TPG Capital's Jim Coulter, Prince Max of Liechtenstein and renowned climate scientist Johan Rockström, among many other supporters and key speakers.
First in Hong Kong: Green bonds and more
Efforts to excel in the field of green finance have accelerated with government actions in recent years. Hong Kong has been at the forefront with innovations such as the world's first tokenized green bond. Total retail green bond issuance has already reached HK$20 billion, far exceeding the initial target. The government also recently announced an additional digital green bond issuance totaling HK$6 billion, with plans to increase annual green bond issuance to HK$65 billion. The scope of the program will also be expanded to include sustainable finance projects.
Another market-leading move is Hong Kong's ambition to become one of the first jurisdictions in the world to align its sustainability disclosures with benchmarks issued by the International Sustainability Standards Board (ISSB). Hong Kong's Financial Services and Financial Secretary, Mr Christopher Hui, has issued a vision statement to launch a roadmap in 2024 to provide Hong Kong companies with transparency and a clear pathway on sustainability reporting.
This will advance the foundations of green classification and strengthen Hong Kong's rapidly developing green finance ecosystem. While Hong Kong already has many key elements in place, such as a green and sustainable finance grant scheme, a government green bond framework, ESG skills training subsidies, mandatory ESG disclosure requirements and government debt issuance, an industry-wide recognised classification will go some way to establishing clearer reporting standards.
The strength of the ecosystem has progressed on multiple levels
Another major development is the Hong Kong Monetary Authority's (HKMA) online physical risk assessment platform, which supports all locally licensed institutions within the regulator's scope of operations. All banks in Hong Kong will be able to use the platform to analyse their existing climate-related physical risk portfolios. As the HKMA is the first regulator in the world to introduce such an initiative, it sends a positive signal about Hong Kong's climate risk capabilities and demonstrates that Hong Kong is an active leader in green and sustainable finance.
The Hong Kong Financial Services Authority, the Treasury Department, the Securities and Futures Commission, InvestHK and Cyberport have collaborated on the Hong Kong Green Fintech Map, which aims to help private enterprises identify green fintech solutions for their business needs. A first for Hong Kong, the directory and business matching platform is currently in the soft launch phase and will support the robust growth of Hong Kong's fintech ecosystem.
This momentum extends beyond government agencies, with companies like Arkreen Network and Hashkey Group on a mission to spearhead the development of the Decentralized Physical Infrastructure Network (DePIN) ecosystem as a concept to facilitate the trading of renewable energy certificates. Envisioning Hong Kong as a global hub for this innovative ecosystem, Arkreen aims to establish database on-chain tokenization and offsetting as the standard for carbon neutrality in the Web3 community, fostering an inclusive climate action network for the global community.
Hong Kong's trump card: Mainland China China's offshore capital and risk management hub
On the international stage, Hong Kong will play a crucial role as an offshore capital hub for green finance in mainland China, as it needs to fill a major gap in green finance to support the transition to a low-carbon economy.
“Greening Asia will require around US$66 trillion in investment over the next 30 years, highlighting the huge demand for green finance in the region,” said Joseph Chan, Undersecretary for Financial Services and Finance, who noted that at the Redefining Hong Kong conference held last November, Hong Kong accounted for one-third of Asia's total green and sustainable debt (including both bonds and loans), a growing trend.
Hong Kong is one of the world's largest green finance centers, with about 220 ESG funds with $170 billion in assets under management, according to the latest government statistics. Hong Kong is attracting investments from investors around the world and solidifying its position as a center for Chinese offshore capital in green finance. Take the news of Australian family office Twynam Group for example, which has committed to raising $50 million to invest in technology companies focused on reducing carbon emissions in Hong Kong and the Guangdong-Hong Kong-Macao Greater Bay Area (GBA).
Combine this capital flow with Hong Kong's burgeoning green tech ecosystem and the potential for real impact is enormous: Hong Kong is already home to more than 4,200 startups, and the city's private equity and venture capital investors are increasingly open to investing in green ventures, collectively managing around $220 billion in assets.
As the Financial Secretary said in a previous blog on sustainability, “Hong Kong's highly efficient financing platform and technological capabilities are becoming a driving force for green transformation in Hong Kong, the country and the region.” This is truly a golden opportunity for Hong Kong to bring together entrepreneurs, private and public sector leaders to promote cross-sectoral exchanges and cooperation in green technology and green finance, and better leverage Hong Kong's role as an international platform on climate change.
