Green financing, green bonds, and sustainable financing are emerging as vital tools to promote ESG development across the globe. Should enterprises in Hong Kong commit to a sustainable transformation now? Will these sustainable investments be worth it in the long run? In this blog, we will explore the importance of these financing methods and provide valuable insights on how Hong Kong enterprises can transform themselves in an increasingly ESG and sustainability-driven economy.
What is Green Financing? How Does It Build a Sustainable Economy?
Green financing, or responsible and sustainable investing, is an initiative to drive the development of a more sustainable economy. It involves responsible investment practices that consider environmental, social and corporate governance (ESG) criteria as part of their decision-making process. This type of investing has gained increased attention in recent years due to its potential to help companies mitigate risk and enhance returns.
Green financing includes various financial products and services such as:
- Green bonds - debt instruments that finance projects which have a positive environmental or social impact. They offer investors an opportunity to put their money toward initiatives such as renewable energy development, climate change resilience, biodiversity conservation, and responsible land use.
- Socially responsible investments (SRI) - an investment strategy which seeks to promote responsible and sustainable corporate practices. Both retail investors and financial institutions are now more inclined than ever to invest in companies that demonstrate ESG criteria, such as environmental stewardship, workforce diversity, responsible labour practices, and commitment to the local community.
- Impact investing - investments that seek to generate a measurable, beneficial social or environmental impact along with a financial return. Impact investors invest in initiatives such as renewable energy sources, sustainable agriculture, responsible land management practices, and responsible forestry.
Green or sustainable financing is helping us build a more sustainable economy by pivoting capital into companies that are committed to responsible and sustainable practices. Businesses around the world now have huge incentives to take part in responsible investing and green financing to not only reduce their environmental footprint, but also to improve the trustworthiness of their brand and receive financing from investors and governments.
Growing International Interest in Sustainable Finance
A 2022 Global Climate Survey revealed that 84% of investors now believe that climate change will be a significant factor or at the centre of their investment policies within the next two years. In the year 2021 alone, over $500 billion were injected into ESG-integrated funds on the market. Apart from retail investors, major financial institutions around the world are also rapidly increasing the proportion of ESG investments and sustainable financing in their portfolios.
Aside from investors and financial institutions, governments have also become important patrons in sustainable finance as countries around the world look to achieve sustainability goals and fulfil their environmental responsibilities. In Hong Kong, for example, the Hong Kong Monetary Authority has already established The Centre for Green and Sustainable Finance to support businesses and institutions in their transition to a more sustainable development pathway. Hong Kong Businesses can get funds and subsidies from the Green and Sustainable Finance Grant Scheme to support their green bond issuance and more. Overall, Hong Kong is building a green finance ecosystem, supported by the government and private sector interest, to capture the growth potential in sustainable finance.
ESG and Green Investing Opportunities and Challenges for Businesses in Hong Kong
The impact of climate change and environmental hazards on businesses is becoming increasingly apparent. Investors and governments are pushing hard to achieve a sustainable economy and businesses that fail to take action will be left behind. According to a recent survey, sustainability is rated as an important purchase criterion for 60% of consumers around the world. Environmentally conscious Gen-Z consumers and investors will soon become the dictating force of our economy and they will undoubtedly demand responsible, sustainable products and services.
Moreover, Hong Kong’s regulatory environment for ESG reporting is multifaceted, complex and constantly changing to keep up with global trends. For listed firms, the Stock Exchange of Hong Kong lays down ESG disclosure rules that include both mandatory requirements and comply or explain provisions. To attract ESG investing, companies in Hong Kong are required to keep up with the ESG development.
5 Ways for Hong Kong enterprises to get started on ESG
1. Renewable Energy
Making the switch to renewable energy sources is one of the easiest and most impactful ways for businesses to become responsible investors. Solar energy, for example, is becoming increasingly affordable and with subsidies from the Hong Kong government, businesses can now install solar panels to power their operations at a very reasonable cost. In addition, Hong Kong Electric, CLP Power and other energy providers in the city now offer green electricity tariff plans that can help companies cut down their carbon emissions while also saving money. The Eco Building Fund from CLP, for example, provides up to HK$500,000 in subsidy for businesses that want to undertake energy-saving improvement works in their buildings.
2. Smart Lighting Solutions
Smart lighting solutions remotely control LED technology, sensors, and other features to ensure that the lights are only used when needed. This helps businesses save money on electricity bills while also cutting down their carbon emissions. Smart lighting systems can be connected to building management systems which allow companies to have full control of their energy usage, set alarms in case of emergency, and monitor energy efficiency levels at all times.
3. AI Building Energy Control System
For large-scaled businesses, AI building energy control systems provide a comprehensive solution for responsible investing and green financing. This system uses AI to optimise the energy management of buildings in real-time according to weather conditions, occupancy rates and other factors. By integrating AI into their operations, businesses can reduce their electricity costs while also cutting down waste and emissions.
4. Power Optimisation
Aside from the above options, power optimisation 4technologies can also help enterprises save a tremendous amount of energy at a relatively low cost. For example, n quantum optimization device can efficiently reduce a business's electricity usage by as much as 10% per year. HKT’s 4th generation Quantum Optimisation Device is a patented technology which improves the irregular conduction of electrons on power networks to reduce friction and heat emission and save power.
5. Energy Management and PropTech
Oftentimes, ESG and sustainability objectives cannot be achieved by a piecemeal solution, but instead, require a macroscopic and thorough strategy. A holistic energy management and PropTech solution that combines all of the above strategies is probably the best way to boost a business's ESG and sustainability efforts. Combining an expansive arsenal of technology that consists of zero downtime power optimisation, AI building and energy control, smart lighting, renewable energy, PropTech, and more service helping enterprises identify their most pressing ESG and sustainability needs before devising the most tailored and suitable solution for their business model.
Sustainable Future with HKT
With HKT's Energy Management and PropTech Solutions, enterprises in Hong Kong have all the necessary tools to help build a more sustainable economy and remain competitive in an ever-changing world. Our energy optimisation technologies have already been implemented in 22 of HKT's exchange buildings and saved as much as 250,000 kWh of electricity in 2022. Our service continues to help enterprises in Hong Kong reduce energy consumption by 10% to 20% annually and can help you achieve your ESG and sustainability objectives with unparalleled cost-efficiency. Get in touch with HKT's team of experts and learn more about what we can achieve for your enterprise today.