25 September 2023
Written by The Chamber of Hong Kong Listed Companies
Emerging global trends in mainstream transition to net-zero operations and positive social impact investments present abundant business opportunities.
Businesses worldwide, particularly those with high levels of carbon emission, are adopting decarbonisation strategies by modernising their operating procedures. Transition financing, a form of financial support that helps high-carbon companies implement long-term changes to become more environmentally friendly and achieve sustainable growth, is backing these decarbonisation efforts and gaining traction around the world, according to Mike Wong, CEO of the Chamber of Hong Kong Listed Companies (CHKLC).
As companies intensify their efforts to mitigate the effects of climate change, a global push for positive social impact investments is gaining momentum. A growing number of socially conscious investors are considering whether a company’s operations and activities positively impact and benefit all stakeholders, including customers, employees, suppliers, and the larger community, when making investment decisions. Fundamentally, they want to know if a company’s business model and its products or services deliver a positive purpose for society, alongside exposure to ESG risks, such as climate-related ones,” Wong notes.
Transition finance and social impact investments are integral to achieving sustainability and they are the key focuses of the ESG and Green Finance Opportunities Forum 2023, to be held on October 4, at the JW Marriott HK Hotel. The forum’s theme is “Combating Climate-risks and Achieving a Sustainable Future: Transition Finance and Innovative Technology”. The organiser is CHKLC and the title sponsor is Hang Seng Bank.
“As an active supporter of sustainability, Hang Seng is proud to contribute to this forum, bringing together business leaders and sustainability experts. This initiative fosters the exchange of innovative ideas and promotes best practices in ESG and sustainability. Our aim is not only to facilitate collaboration but also to inspire actions that hasten the shift towards a low-carbon economy,” says Shelley Zhou, Head of Corporate Sustainability of Hang Seng bank. “In line with our vision for a more sustainable future, Hang Seng aims to achieve net-zero carbon emissions from our own operations by 2030.”
Transition finance
Transition finance refers to investments that enable companies to move towards decarbonisation or low carbon practices. Globally, transition financing primarily focuses on renewable energies, followed by electrified vehicles. Other sectors include energy efficiencies, clean technologies and innovations, circular economy and sustainable infrastructure. In 2022, global investment in the low-carbon energy transition totalled US$1.1 trillion.
Among Hong Kong listed companies, momentum is steadily growing for a net-zero transition in their business model. Companies can make use of transition financing to help lower greenhouse gas emissions from their operations, Wong believes. “In the Mainland or elsewhere, they are modernising their production process, replacing inefficient machinery, or applying solutions that monitor and reduce emissions. Companies are advised to have clear emission reduction goals with compatible strategies, set clear reduction targets with achievable pathways, and maintain transparency of progress.”
The Hong Kong government’s backing for green initiatives is robust. The Green and Sustainable Finance Cross-Agency Steering Group, a government-established entity, outlined key objectives in August to bolster Hong Kong’s position in the global green finance arena. This move is expected to expedite the evolution of the green finance ecosystem, encompassing the creation of a sound regulatory structure for sustainability disclosures, a diverse suite of financial products, enhancement of industry capabilities, and pertinent technological or fintech advancements.
Meanwhile, the Glasgow Financial Alliance for Net Zero (GFANZ) is poised to launch its Hong Kong chapter, with the aim of advancing green financing in the region. This will be achieved through collaboration with institutions on transition planning and scaling up transition finance.
“The banking sector plays a crucial role in supporting companies in Hong Kong as they embark on their transition initiatives,” says Zhou. “With this in mind, Hang Seng is focused on facilitating our customers’ efforts to enhance their ESG performance. We aim to assist their transition towards more sustainable business models by offering a range of sustainable financial solutions.”
Hang Seng Bank recently opened a Business Banking Centre in Wanchai which seamlessly integrates business banking, green financing, and an ESG-focused service concept. The centre underscores the Bank’s support for customers in their journey towards more sustainable business models. Additionally, the team at the centre has received specialised training, equipping them with knowledge on incorporating sustainability into business operations.
Social impact investments
The implementation of the United Nations’ universal action plan for global cooperation on sustainable development from 2015 to 2030 is in full swing. In 2015, all UN member states committed themselves to adopting “Transforming the World: the 2030 Agenda for Sustainable Development” and its motto “To leave no one behind.” The 2030 Agenda defined 17 Sustainable Development Goals (SDGs) with 169 targets.
The SDGs state that economic development is not sustainable if it sacrifices a clean and hygienic living environment, equal opportunities, access to education, fairness and justice, natural resources, and ecosystems. Therefore, financing should be channelled towards endeavours and projects with positive social impact.
Socially conscious investors seek to generate positive social and environmental impact in addition to financial returns. This includes investing in companies that prioritise data privacy, gender equality, employee welfare, community care, and environmental care. Sustainability of the ecosystem is particularly relevant for businesses whose activities have a direct impact on the environment, such as those in the mineral or pulp and paper industries.
According to Wong, Hong Kong-listed companies that exhibit positive behaviour and practices will have improved access to capital, enabling them to sustain their business growth. “At the same time, social impact investors and large corporations are willing to fund projects that generate positive social impact. These projects encompass support for youth education and entrepreneurship, medical care and drug development, as well as the enhancement of human livelihood, including crop improvement, water conservation, and irrigation control. Although these philanthropic projects may not yield substantial financial returns, they are vital for the sustainability of society and humanity. The fact that they are attracting funding interest is highly encouraging,” he says.
ESG and Green Finance Opportunities Forum
The upcoming forum will host in-depth discussions and analyses of the key trends in transition finance and social impact investments in Hong Kong and the GBA, with officials and experts sharing insights in the utilisation of these tools to combating climate change and achieving a sustainable future.
With the introduction of environmental, social, and governance (ESG) compliance by HKEX, ESG has become a key performance indicator for corporations. At the forum, executives from leading listed companies will share their insights and experiences in implementing innovative strategies and leveraging cutting-edge technologies to achieve a net-zero transition while making a positive social impact.
Chairperson of the CHKLC, Catherine LEUNG and Executive Director and Chief Executive, Hang Seng Bank, Diana CESAR, will deliver the welcome speeches. Financial Secretary of the HKSAR, Paul CHAN, will give the keynote address.
Mr Frank HEUNG, Head of Structured Finance, Commercial Real Estate & Corporate Advisory,
Hang Seng Bank and representatives from the International Finance Corporation, Asian Infrastructure Investment Bank, and International Capital Market Association will discuss the emerging trends and opportunities in transition finance.
Professor Simon HO, President, the Hang Seng University of Hong Kong, will share his views on social impact investments for sustainable growth in a panel discussion. He will be joined by representatives from the World Benchmarking Alliance (WBA), New World Development Company Ltd, and Shanzhai City, a social development technology company.
The panel “Regulatory updates on ESG Reporting and Climate Risks Disclosures” will feature Stacey WONG, Chief Operating and Risk Officer, Quam Plus International Financial Ltd, Paul MALAM, Head of Policy and Secretariat Services, Listing, at HKEX, Jennifer LEE, Director, Corporate Finance Division at SFC, and representative from SWCS Group (will add one name)
Speakers featured at the discussion “Decarbonisation: Strategy and Technology Application” will include Peter YAN King-shun, JP, CEO, Cyberport, and representatives from green technology solutions provider and enterprises that utilise them.
A concurrent exhibition will offer attendees the opportunity to explore collaboration opportunities with Cyberport-based technology enterprises and learn how green tech and fintech can aid in achieving good ESG practices and compliance.