On 1 February 2024, HKGFA and China Water Risk (CWR) co-hosted a workshop for selected thought leaders in the banking industry, titled “China ICT Is Power Hungry, Fast Growing and Bankable – So Why Isn’t It A Key Transition Sector?” to discuss the growing carbon emissions of China’s ICT sector and the challenges and opportunities of financing the sector’s transition.
Ms. Dharisha Mirando, Lead, Finance Engagement & Water Risk Valuation, CWR, presented an overview of the findings in their report – “China ICT Transition: The good, bad & ugly of 5 HKEX ICT listco’s net zero pledges & climate action” which revealed that global ICT accounts for 2-4% of global GHG emissions annually and that just five companies listed on the HKEx can be as much as 2.5x of Hong Kong’s annual GHG emissions. She further underlined the growing significance of the ICT sector as a heavy-emitting industry with the emergence of AI while sustainable financing is crucial in encouraging industry decarbonisation.
Mr. Zhai Yongping, Senior Advisor, Strategy Development Department, Tencent, shared the company’s decarbonisation pathway and its strategies such as prioritising the reduction of emissions throughout its operation and supply chain, with carbon offsetting seen as the last resort to reach its carbon neutrality goal by 2030 while the operation of data centres also requires an increase in energy efficiency and a significant emission reduction by transitioning from conventional energy sources to renewable energy such as green electricity supply including rooftop solar panels.
Representatives from the banking industry had a fruitful discussion on the relationship between green finance and ICT with key takeaways for each of the following questions posed during the workshop:
1. The ICT sector is ready for decarbonisation, which is in line with what China’s policymakers want. Given the sector is bankable why is ICT overlooked by banks as a priority transition sector?
- Internet sector assets are not considered a high-emitting sector, but rather a light-emitting sector that does not require transition.
- There is a need to educate the public on the significance of carbon emissions in the ICT sector, and how drastic the related emissions from technologies like AI and blockchain could increase in the next decades.
2. What are the main challenges in working with the sector? Is it the lack of taxonomy or are other sectors more obvious in terms of their emissions?
- Capital treatment can be regulated (i.e. labelling ICT assets like data centres as real estate and infrastructure assets to receive better capital treatment and lower capital requirements for clients to decarbonise.
- The Government could define sustainability requirements and include taxonomy for the ICT sector for decarbonisation.
3. Scope 2 (i.e. electricity use) is important but on-site renewable energy and even off-site might not be achievable for everyone, so does that mean we need to create opportunities in the carbon market? What would this look like?
- A global unified carbon market is not available currently.
- Transparency on the verification, issuance, and double-counting of carbon credits should be further encouraged.
- There is a lack of regulation and carbon credit exchange in the market to offer comfort to ICT companies.
- There are limited options for sectoral carbon offsetting.
HKGFA will continue to facilitate discussion through our capacity-building events and working group initiatives for different sectors with the banking industry on the role of green finance in accelerating the net-zero transition.