Hong Kong can model sustainable development and finance it too

There are few international financial centres situated so close to nature as Hong Kong. On a good day I can reach the beach within twenty minutes from my desk; in under an hour, I can stand among the birds and frogs of the Yuen Long wetlands. The Hoi Ha Wan Marine Park, host to more than 60 species of coral, is only 20km or so away from Mong Kok, one of the most densely populated neighbourhoods on the planet.??

So it is entirely appropriate that Hong Kong, long a hub of global capital, has become a green finance champion. The local government is already the largest green bond issuer in the Asia-Pacific region, propelling the development of the corporate market.??Environmental considerations feature in almost every conversation I have with business leaders. That suggests there is an opportunity for our city to model how to protect biodiversity and limit emissions at home, while increasing financial support for Asia’s climate transition.??

Hongkongers are already feeling the effects of climate change. By the 2040s, an interuniversity team of Hong Kong researchers predict, residents will sweat through an average of 48 nights per year in which temperatures remain above 28 degrees, up from 32 at present. Extreme rainfall could increase by 40%, they warn. As a port city, rising sea levels are a particular risk; should the ocean rise as the Intergovernmental Panel on Climate Change projects, commercial districts that generate over 80% of the city’s fiscal revenue could ultimately be affected, according to estimates by China Water Risk.?

This city recognised these risks early on. Urban emissions peaked a decade ago. The government has sharply reduced coal and is phasing out coal in electricity generation by 2035, striving to achieve carbon neutrality by 2050.?

To get there, I believe a two-pronged approach could be most impactful: collaborating to accelerate Hong Kong’s local decarbonisation, while fostering expertise and financial ecosystems to deploy new climate tech across Asia.??

Starting at home?

Tackling local emissions begins with electricity generation. Renewables are clean and cost-effective, but more power will need to be sourced from nuclear, hydrogen, and carbon capture and storage sources. Increasing connectivity with mainland China, the world’s clean technology superpower, could support this shift through importing cleaner electricity.?

Buildings will be the next largest demand for transition investment dollars. Bringing together financial services, the construction industry, and landlords can support retrofitting and energy efficiency upgrades. Heat pumps should be part of the solution. They can cool and heat, helping to reduce energy-intensive air conditioning.??

There are also opportunities to push the envelope in urban design too. The Northern Metropolis, for example, is looking to provide more than 900,000 homes for 2.5 million people. Here is a chance to show how Hong Kong can serve a clear social and economic need for better housing, while protecting the area’s wetlands, fish ponds, marshes, reed beds and mangroves. The Northern Metropolis can be the greenest neighbourhood in Asia,?a destination to witness the newest and best-in-class case study on sustainable urban development. It’s not about showing the speed at which we can pour concrete, but an unparallel opportunity to grow a home-grown pearl.

International impact?

Some policy approaches to the energy transition, such as those seen in the US and Europe, link climate investment with the re-industrialisation of domestic manufacturing. Hong Kong should prioritise services instead, capitalising on our comparative advantages to develop next-generation climate solutions.??

Reducing Hong Kong’s share of global emissions will take work, but our impact will be greatest by financing decarbonisation across Asia, home to some of the world’s largest emitters. That could cost $19 trillion by 2030, according to an HSBC analysis of data from McKinsey’s Transition Finance Model.

Heavy emitting industries face a particularly steep challenge; many of the technologies they need to clean up aren’t?commercially available yet. The innovators addressing this challenge need better scientific research, more talent and more money. Hong Kong is positioned to supply all three,?linking cleantech startups here with clients around the world. The launch of HSBC Innovation Banking in Hong Kong last year can support this mission.?

Doing this will reinforce Hong Kong’s unique status as a super-connector as the regional energy transition gathers pace. A dual focus on exporting clean finance and technology while decarbonising domestically will buttress Hong Kong’s leadership and benefit the environment, at home and abroad.?

A version of this article also appeared in the South China Morning Post.