The launch of the Hong Kong Green Finance Association on September 21 was an auspicious occasion. Chief executive Carrie Lam was the first speaker, while Securities and Futures Commission head Ashley Alder followed shortly afterwards.
The event discussed at length the importance of Hong Kong embracing green finance. Speakers talked about the need to promote green finance, and how the territory is uniquely suited to do so.
Unfortunately, there’s little evidence to date to support Hong Kong’s sudden green evangelism. Indeed, while the city has decent governance, until recently its authorities barely paid lip service to environmental protection or the need to consider social dignity.
Examples abound. The territory has a quasi-permanent blanket of smog due to dirty ships, lorries and light buses, which has caused rapid increases in asthma and bronchial problems. City planning is terrible; buildings are thrown up with scant regard for their impact on surrounding infrastructure. Meanwhile the insipidity of Hong Kong’s Buildings and Planning Departments is evident in the increasingly small apartments, and by how little new land is released for cheap apartments that the average citizen has a chance of affording.
And while the city records continual budget surpluses, every day geriatric men and women dig through rubbish on the streets to collect cardboard so they can get a few dollars to supplement meagre social security payouts.
Hong Kong’s commitment to the environment on the investment front has also been gossamer thin.
The city has made next to no efforts to encourage mandatory provident fund providers or life insurers to promote environmental, social and governance (ESG) considerations in their products. No Hong Kong asset owner has signed up to the United Nations’ Principles for Responsible Investing (nor have any in China).
Hong Kong investors are encourged to follow its stewardship code, and there is an ESG guideline for listed companies. But neither are mandatory.
Indeed, China’s plans to introduce mandatory environmental disclosure requirements of listed companies in 2020 could come before any such moves by Hong Kong.
There are reasons for this disregard. Most importantly, the territory’s economy is dominated by conglomerates with little desire to implement higher environmental disclosures.
EYEING GREEN BUCKS
So why the push for green finance? That’s simple: Hong Kong rarely passes up the opportunity to make a buck in financing, particularly when it relates to China.
The country is the biggest emitter of carbon in the world; it causes more than the US and European Union combined. Getting its emissions down will be essential to combating climate change, which itself is worse than expected. A report by the United Nations’ Intergovernmental Panel on Climate Change on October 8 underscored irreversible damage could be done to the global climate over
the coming decades unless huge efforts are made to cut carbon emissions.
Beijing knows it needs to do much more; HKGFA chief executive Ma Jun said the nation wants to spend $600 billion a year in green finance for the coming few years. However, 90% of that is to be sourced from the private sector.
That’s where Hong Kong comes in. It wants to be the conduit for much of that financing, despite its own meagre ESG credentials. And the city could make a big difference. It boasts genuinely
better disclosure and assessment standards than those of China, where on October 22 alone four provinces were accused by the Ministry of Ecology and Environment of faking efforts to
rectify their serious environmental problems.
If Hong Kong’s government and watchdogs can create a green funding environment into China that is vigorously regulated, monitored and enforced, it could make a real difference.
Unfortunately, Hong Kong’s preference for profit over low pollution means it’s entirely possible the city’s chest-beating over green finance plans is accompanied by less regulatory zeal than investors would like. That raises the odds that China’s provinces don’t feel compelled to rein in their emissions, making global climate change more likely.
That’s bad news for coastal areas – including former British colonies built heavily on reclaimed land.