Hong Kong should capitalize on sustainable finance opportunities

Written by Kapronasia || February 08 2023

Hong Kong has been busy preparing to roll out the red carpet for digital assets, but there are other emerging areas of financial services that are less volatile and trouble prone, and well, more sustainable. To that end, Hong Kong way want to focus more attention on green/sustainable finance given the reality of climate change and the significant opportunities the segment is expected to provide. Bloomberg Intelligence estimates that combined ESG assets could surge to US$53 trillion by 2025, with the Asia-Pacific region driving “the next leg of growth.”

There are many ways for Hong Kong to tap the burgeoning sustainable finance segment. One of the most obvious is to work with mainland China to help Beijing meet its ambitious carbon goals. China aims for its carbon emissions to peak before and 2030 and for the country to become carbon neutral by 2060. Hong Kong could help the mainland achieve these goals if the Hong Kong Stock Exchange teamed up with exchanges in Shanghai to include shares and ETFs featuring firms with sustainable business models, raising greater funds for green finance.

Meanwhile, Hong Kong has already had some success with green bonds. The Hong Kong government last month announced the successful offering of US$5.75 billion in green bonds denominated in dollars, euros and renminbi. The triple-currency offering is the largest ESG bond issuance in Asia and attracted the equivalent of US$36 billion in orders from global investors, according to the Hong Kong government.

Hong Kong sold about US$3 billion of dollar- and euro-denominated green bonds in November 2021, and days later issued its first such note in yuan. The government also raised HK$20 billion (US$2.56 billion) in May 2022 from its first green bond for retail investors, part of the city’s efforts to become a sustainable finance hub.

Unsurprisingly, Hong Kong faces some formidable competition in the green finance segment from none other than Singapore. According to Bloomberg, there were 272 sustainability, green, social or transition bonds listed in Singapore as of Sept. 28, more than double the 103 listed in Hong Kong. Singapore also had an edge in issuance: US$34 billion to Hong Kong’s US$24 billion. Additionally, Singaporean firms lead Hong Kong by a wide margin in green loans, with about US$39.5 billion, compared to US$13.4 billion raised in Hong Kong.

Looking ahead, Hong Kong is expected issue green bonds in a tokenized format. “The objective is to test out the financial infrastructure and the legal and regulatory environment in Hong Kong for the use of DLT throughout the bond lifecycle and to serve as a guide for similar future issuances by market participants,” an HKMA spokesperson told Ledger Insights in January.