Typhoon season is round the corner and climate change is upon us – there’s no better time to get into green finance
- The Hong Kong government’s issuance of a green bond is most timely, promoting awareness of climate change and increasing the city’s profile as a hub for green finance. Around the world, sustainable investment is also growing
Against this backdrop, the Hong Kong government’s issuance of a green bond last month came at the perfect time. It spotlights the most urgent challenge facing humanity today, and at the same time helps position Hong Kong as an international hub for green finance.
Power stations and transport technologies have to be weaned off fossil fuels. Buildings need to consume less electricity. Consumption habits need to change. Roads, ports, electricity and IT grids need to cope with higher sea levels and more storms like Mangkhut.
Green financing will raise the trillions that need to flow into lower-carbon, climate-resilient technologies, projects and infrastructure.
For now, such financing accounts for a tiny portion of the overall capital markets. Political and business climate action, and investor demand for sustainable financing, are growing though.
Research for HSBC by East & Partners, an analysis firm, shows investors are increasingly incorporating environmental, social and governance, or ESG, factors into their investment strategies. According to a recent report from the Global Sustainable Investment Alliance, assets invested sustainably topped US$30 trillion across Europe, the United States, Canada, Japan, Australia and New Zealand as of early 2018. That’s up 34 per cent from 2016.
This is where the government’s new green bond comes in. It will raise awareness of how green bonds can bring substantial advantages to issuers – by tapping into growing global demand for sustainable investment options. By providing a benchmark against which to price future deals, it will encourage a broader range of issuers to come to the market.
The issuer of a green bond is showing awareness of, and preparing for, the long-term challenges of global warming. Over the long term, this could create an advantage in terms of valuation, access to financing and business prospects.
More broadly, the government’s green finance initiatives are also about Hong Kong securing a leading role in this fast-growing sector, and bolstering the city’s reputation as a versatile, forward-looking financial centre.
The city’s sustainable finance initiatives are welcome steps. The challenge now is to act on them. There’s no time to waste.
Helen Wong is HSBC’s chief executive for Greater China