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Last year was a record year for issuance of sustainable ‘dim sum’ bonds in Hong Kong, which reached US$29.5 billion. Photo: Shutterstock

Hong Kong is ‘Asia’s sustainable finance centre’, thanks to green bond growth and carbon-credit trading, bankers say

  • Rapid growth in green bonds and the recent launch of carbon-credit trading by HKEX put Hong Kong into a ‘pivotal’ role, bankers say
  • China needs to raise about US$19 trillion from green bonds and other environmentally friendly funding tools to become carbon neutral by 2060
Rapid growth of green financing and the launch of carbon-credit trading by the local bourse are turning Hong Kong into a leading sustainable finance hub in Asia, financiers said ahead of a key summit this week.

Hong Kong has pledged to reach carbon neutrality by 2050. As part of its efforts to achieve this goal, the government over the past few years has issued green bonds worth US$10 billion as of August, according to a government report.

A green bond is a fixed-income financial instrument designed to support projects with environmental benefits, such as clean energy or water treatment.

“The Hong Kong government is a leading issuer in green bonds for the construction of green yield curve, and this can further develop Hong Kong as a green finance centre globally,” said Rhee Jung-ho, president and CEO of Mirae Asset Global Investments (HK).

Exchange Square in Central, pictured on October 19, 2022, is home to bourse operator Hong Kong Exchanges and Clearing, which introduced a platform for trading of carbon credits last week. Photo: SCMP / May Tse

Rhee is one of 200 senior bankers who will attend the Global Financial Leaders’ Investment Summit in Hong Kong from tomorrow through Thursday. A panel discussion on Wednesday, to be moderated by Nicholas Aguzin, CEO of bourse operator Hong Kong Exchanges and Clearing (HKEX), will focus on the potential of sustainable finance.

Hong Kong has attracted a substantial number of mainland and overseas institutions such as multilateral banks to issue green bonds.

“Hong Kong is the place of choice for investors seeking diversification,” said Alan Roch, head of credit of Asia-Pacific at French lender Credit Agricole Corporate and Investment Bank. “In addition to being a leading offshore yuan centre, Hong Kong is also Asia’s sustainable finance centre.”

China’s first provincial green dim sum bond debuts in Hong Kong

Last year was a record year for issuance of sustainable dim sum bonds, which reached US$29.5 billion, Roch said. Dim sum bonds are yuan-denominated bonds issued outside China, mainly in Hong Kong. Around 20 per cent of dim sum bonds issued in Hong Kong last year were issued with green features, he said.

Hainan, the southernmost province in mainland China, issued the first batch of sustainability dim sum bonds by a Chinese provincial government, worth 5 billion yuan, in Hong Kong last week. Credit Agricole was a joint lead manager and joint book runner of the deal.

Roch believes more issues will follow.

Outlook for green finance in China and Asia remains rosy despite down year

China will need to raise about 140 trillion yuan (US$19.31 trillion) from green bonds and other environmentally friendly funding tools to become carbon neutral by 2060, but will fall short by 44 trillion yuan, according to a report published by the World Economic Forum (WEF) and consulting company Oliver Wyman in July.

This means it needs to fill a funding gap of 1.1 trillion yuan each year between 2020 and 2060 in the financing of green innovative technologies across all sectors including electricity, steel, transport and construction, said the report.

“With its unique position as a global financial centre within China, Hong Kong should play a pivotal role in innovating in the sustainable finance arena to enable further adaptation into the mainland,” said Kevin Anderson, head of investments for Asia-Pacific at State Street Global Advisors. The US firm’s CEO, Cyrus Taraporevala, is taking part in a panel discussion at the summit on Thursday.

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“There is opportunity for Hong Kong to play a leading role in this ecosystem as a prominent financial centre for the issuance of green, social and sustainability bonds,” Anderson said.

The recent launch of carbon-credit trading by HKEX could help Hong Kong further cement itself as a leading centre in Asia to support the development of a global carbon market and the journey to net zero greenhouse-gas emissions.

The new HKEX platform, Core Climate, is an international carbon marketplace for the trading of carbon credits and other instruments to support the transition to net zero.

Environmental start-ups eye listing carbon credits on Hong Kong bourse

Its debut follows HKEX’s July launch of the Hong Kong International Carbon Market Council to gather insights from members on the development of an efficient and effective Hong Kong-based international carbon market.

The Hong Kong government has been working on the development of a green finance industry, and the critical infrastructure and regulatory apparatus that supports this, for close to a decade, said Effie Vasilopoulos, co-leader of the global investment funds group at international law firm Sidley Austin.

“It is in the DNA of Hong Kong to remain focused on key policy objectives, and this has been one of the key areas in which there is much determination to succeed,” she said.

Additional reporting by Peggy Sito