Hong Kong Green Week: banks urged to rethink and review funding criteria for energy transition projects

Banks are trying to develop new metrics to help them assess the feasibility of energy transition projects that utilise new technologies, Citi’s Aveline San says

Asia requires at least US$1.1 trillion of investment a year to meet climate mitigation and adaptation needs, but faces a funding gap of US$815 billion, IMF says

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Banking and finance executives from leading institutions take part in a discussion at the Climate Business Forum, in Hong Kong, on Tuesday. Photo: Jonathan Wong

Published: 2:58pm, 27 Feb 2024

Banks need to adopt more forward-looking and long-term metrics on risk-return assessments to meet the growing financing needs of energy transition projects in Asia, according to top bankers.

The financing gap as well as opportunities for energy transition in the region are huge, but finding viable projects and financing solutions is a challenge, banking executives said at the Climate Business Forum on Tuesday, organised a part of the Hong Kong Green Week.

The challenge for banks is to how to rethink and recalibrate their established risk-taking metrics, according to Aveline San, CEO of Citi Hong Kong and Macau.

“So when we see a lot of more innovative technology projects with a very short operating history, it’s automatically [considered] high risk,” she said. “A lot of us are now trying to develop newer metrics that will help us to be more forward-looking and also look into longer term projects.”

Aveline San, CEO of Citi Hong Kong and Macau, at the Climate Business Forum, in Hong Kong, on Tuesday. Photo: Jonathan Wong

Asia’s developing economies require at least US$1.1 trillion of investment a year to meet climate mitigation and adaptation needs, but face a funding gap of some US$815 billion, according to an International Monetary Fund report last month. Currently, most of the funding comes from sustainable debt instruments like green bonds.