Climate change: sustainability-linked funding can help hard-to-abate sectors access transitional green finance, Hong Kong forums hear

Companies, particularly those in hard-to-abate sectors, should consider sustainability-linked bonds, International Capital Market Association’s Ricco Zhang tells Chamber of Hong Kong Listed Companies’ ESG and green finance forum

Even before regulators draw up guidances and taxonomies, companies should start thinking of their plans for transitioning to greener businesses, SFC’s Julia Leung tells annual forum of the Hong Kong Green Finance Association

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From left, the Post’s Eric Ng, Frank Heung of Hang Seng Bank, and International Capital Market Association’s Ricco Zhang, at the Chamber of Hong Kong Listed Companies’ forum on Wednesday. Photo: Yik Yeung-man

Published: 6:31pm, 4 Oct 2023Updated: 7:05pm, 4 Oct 2023

Companies in Hong Kong and mainland China, especially those whose operations are difficult to decarbonise, must step up their game on devising credible climate-transition plans to gain access to funding, according to speakers at two green finance forums in Hong Kong on Wednesday.

These firms should tap transition financing tools such as sustainability-linked bonds and loans, where creditors demand performance targets aligned with global climate and sustainability ambitions, they said. Such tools are different from the more established green bonds and loans, whose proceeds can only finance environmentally friendly projects, such as renewable energy.

“For some companies, particularly those in the hard-to-abate sectors, it is difficult for them to issue green bonds, which can only fund green projects,” said Ricco Zhang, senior director Asia-Pacific at International Capital Market Association. “To transition their business, sustainability-linked bonds is something they should consider.”

Zhang was speaking at a transition finance panel at the Chamber of Hong Kong Listed Companies’ ESG and green finance forum on Wednesday.

Hard-to-abate sectors – such as fossil fuel electricity generation, cement, metals and chemicals production – are industries where major greenhouse gas emissions reduction is technically challenging or prohibitively costly with currently available technology. Such sectors are among the biggest greenhouse gas emitters.

For such companies, financial regulators in some jurisdictions in Asia are close to rolling out so-called taxonomies, or green and transition activity classifications, for climate transition financing.