Investors going green for sustainable returns
As the concept of green finance gains more traction globally, investors are embracing the green agenda in Belt and Road projects for sustainable returns and a better environment.
Speaking at a panel discussion on green finance at the Third Belt and Road Summit on Thursday, Joseph Chan Ho-lim, under secretary for Financial Services and The treasury of the Hong Kong Special Administrative Region, said while infrastructure projects are among the key driving forces in the B&R Initiative, they need to meet two major requirements — sustainability and capital.
The Asian Development Bank has estimated that Asia would need $1.7 trillion of infrastructure investment annually between 2016 and 2030.
“With these two key requirements, green finance has become a crucial part to support the infrastructure development under the Belt and Road Initiative,” said Chan, who believes that Hong Kong, as a leading financial center in Asia, has a unique advantage to be the region’s green financial center as well.
One of the SAR government’s most recent moves in this direction is the launch of the HK$100-billion ($12.7 billion) Government Green Bond Program.
But, the challenge is how to create new wealth while not causing too much damage to the environment, since it will ultimately put constraints on the growth, said Jonathan Drew, managing director, infrastructure and real-estate group, global banking Asia Pacific, at HSBC.
Seeing the robust growth of green bonds, which now leads the way of the green finance market, Drew said the potential is still huge. For example, the $160-billion green bond issued globally last year represents just two percent of the total fixed income issuance during the same year.
He said countries along the B&R route account for 63 percent of the world’s population, but enjoy only about 29 percent of global GDP, adding that the initiative will be conducive to addressing the unequal distribution of wealth and income, especially for the less-developed countries.
“With the progress of the Belt and Road Initiative, we’ve found that many countries now want Chinese enterprises to help them build sewage plants or hazardous waste treatment plants instead of thermal power plants, hydropower plants and glass factories that were used to be quite common in the past. This is an apparent growth of their demand in environmental protection,” said Liu Dashan, chairman of the China Energy Conservation and Environmental Protection Group.
“Green development is sustainable development and a shared goal of a community with a shared future for mankind,” said Liu, adding that green finance is one of the ways to promote green development.
David Pang, treasurer of MTR Corporation, said the company has set up a green bond framework since 2016 to provide guidance on the issuance, use of proceeds and reporting of green bonds. This has now been expanded to a green finance framework to broaden the scope with green loans and other green credit facilities.
“You need to spend more time and money to develop a green bond framework, and you need to prepare more reports, but the benefit can outpace the cost,” he said.
A paradigm shift is needed as some investors still have the misunderstanding that there is a concession in return with green finance, said Pat-Nie Woo, a partner of business reporting and sustainability at KPMG.
“For any company going into this direction, it’s just good risk management and a lot of these projects have very attractive returns,” said Woo. “And, you’re staying ahead of regulations, which are all very important.”
Stephen Wong Yuen-shan, deputy executive director and head of the public policy institute of Our Hong Kong Foundation, moderated the session.
Green development is sustainable development and a shared goal of a community with a shared future for mankind.”