SCMP – Green finance: Greater Bay Area pilot for climate-mitigation projects to meet international standards, draw global investors

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  • Policymakers meet in Hong Kong to discuss ways to further integrate the sustainable finance markets of the Greater Bay Area
  • Several decarbonisation pilots will embrace international disclosure and verification standards while fostering a regional green finance ecosystem

Greater Bay Area (GBA) regulators are pushing several pilot schemes for decarbonisation projects that will embrace international disclosure and verification standards and help foster a regional green-finance ecosystem, according to the Hong Kong Green Finance Association.

 

Creating such an environment would be critical for the US$2 trillion of fundraising that is needed to finance China’s carbon neutrality goal by 2060, said the association’s chairman Ma Jun, who also co-chairs the G20 nations’ sustainable finance working group.

 

“It is important to have demonstration projects to illustrate what are the essential elements to build up a regional green finance ecosystem,” he said in an interview.

 

Ma, who earlier was chief economist at the People’s Bank of China (PBOC), where he drove projects like “harmonisation” of green bond standards, has also worked as an economist at Deutsche Bank, the International Monetary Fund and the World Bank.

HK Green Finance Association chairman Ma Jun and Standard Chartered Asia head of sustainable

 

“Once we have the project categories, we can specify the standards for project labelling and the disclosure requirements. Project developers can then find ways and policy support to make their projects bankable.”

 

China accounts for over a third of global solar-energy generation and more than 80 per cent of solar-module manufacturing, said BNP Paribas, adding this dominance had translated into substantial growth in green-bond issuance. Renewable energy projects accounted for 60 per cent of the use of proceeds of all green bonds issued in China in 2021, according to Climate Bonds Initiative.

 

On Monday, bay area policymakers met in Hong Kong to discuss ways to further integrate the sustainable finance markets of the region comprising Hong Kong, Macau and nine cities in southern Guangdong province.

 

The pilot projects will primarily be located on the mainland and focus on the real estate, transport and manufacturing sectors, Ma said.

 

The project developers will be encouraged to adopt international transition finance frameworks and standards so they can tap global markets via investment banks in Hong Kong and Macau.

 

For example, in the buildings sector, the IFC Edge green buildings certification can be included as an acceptable quality-assurance standard for energy efficiency in retrofitting projects, said Tracy Wong Harris, deputy secretary general of the association.

 

IFC Edge is a green building certification for emerging markets that determines what constitutes a green building, rewards property developers for building green, increases regulatory pull and promotes direct investments. It is administered by Green Business Certification Incorporated in most countries around the world.

 

“This can help unlock more capital to finance projects on the mainland, as many overseas investors are not familiar with mainland certifications,” Harris said, who is also the head of Asia sustainable finance at Standard Chartered.

 

The pilot project proposals should include short, medium and long-term targets for reducing greenhouse-gas emissions, implementation plans, governance arrangements and the support of scientific methodologies, Ma said.

 

The bay area will need to plough US$1.84 trillion over four decades into achieving China’s goal of achieving carbon neutrality by 2060, according to a study led by the World Resources Institute.

 

The energy and manufacturing sectors account for most of this investment requirement, needing US$830 billion, followed by road transportation, at US$696 billion, and real estate, at US$314 billion, said the study’s report published on Thursday.

 

The bulk of the spending will support clean power generation, adoption of electric and hydrogen fuel-cell vehicles, and investment in railway and water transport, besides buildings retrofitting.

 

The study also has inputs drawn from the Greater Bay Area Green Finance Alliance, Hong Kong think tank Civic Exchange, China Quality Certification Centre’s Guangzhou branch and various mainland Chinese academic institutions.

 

It recommended establishing a cross-regional policy coordination mechanism and promoting regional interoperability on green finance regulations, including projects classification, disclosure and verification standards, to accelerate climate-transition initiatives.

 

The study suggested that GBA cities should fund subsidies on the costs related to green and sustainable bonds, loan issuance and external reviews, similar to an initiative launched by the Hong Kong government two years ago.

 

Given its financial strength and its economy’s lower carbon intensity, it is “entirely possible” for the bay area to achieve carbon neutrality by 2050, the same time frame as Hong Kong’s goal and a decade ahead of China’s, Ma said.

 

“The GBA’s carbon emission per unit of economic output is just half that China’s,” he said. “With its financial strength, it can demonstrate how decarbonisation progress can be achieved and lead the way on further achievements in the future.”

Source: South China Morning Post

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