Keynote Address: The Hon. Paul Chan, Financial Secretary, Hong Kong SAR
(Keynote transcript below)
Gary (Chief Executive Officer of South China Morning Post, Mr Gary Liu), Tammy (Editor-in-Chief of South China Morning Post, Ms Tammy Tam), Distinguished Guests, Ladies and Gentlemen,
I am delighted to join you today for the SCMP's Climate Change Hong Kong Summit. Congratulations to the SCMP on hosting this event in partnership with the Asia Society Policy Institute.
Climate change affects all of us. As with other cities, Hong Kong is facing various challenges such as rising temperatures and more extreme weather events. I am grateful for this opportunity to share with you the HKSAR Government's initiatives in tackling climate change. I will focus on three key areas: reducing carbon emissions; boosting resilience; and promoting a circular "green economy" with green finance at its core.
Hong Kong was among the many cities in Asia to take early action against climate change. Since 1997, local power companies have stopped building new coal-fired power plants in Hong Kong. Instead, they have been gradually replacing coal with natural gas and zero-carbon sources. In recent years, we have been promoting electric vehicles and vessels, and introducing innovative waste-to-energy and waste-to-resources facilities.
Our decarbonisation efforts have yielded positive results. Hong Kong's carbon emissions in 2020 were about 20 per cent below the 2005 level, with a per capita emission of about 4.5 tonnes per year. This represents a nearly 30 per cent drop from the peak level of 6.2 tonnes per capita in 2014. Although we have made some progress, there is still much more to do!
To align with our country's commitment to reach peak carbon emissions before 2030 and carbon neutrality before 2060, the HKSAR Government has set its own targets. Hong Kong will strive for carbon neutrality before 2050. We will also reduce total carbon emissions by half before 2035, using the 2005 level as the baseline. To achieve these goals, we released the Hong Kong's Climate Action Plan 2050 last year. It outlines the four major decarbonisation strategies and measures, namely net-zero electricity generation, energy saving and green buildings, green transport, and waste reduction.
Over the last decade alone, we have already allocated more than $47 billion to implement various energy saving and renewable energy measures. In my Budget this year, I set aside another $10 billion to take forward a range of measures. These include:
- An injection of $200 million into the Green Tech Fund to support research and development projects that promote decarbonisation and enhance environmental protection. Some 40 additional projects can benefit from the new funding;
- An additional $1.5 billion to extend the Subsidy Scheme for EV-charging by four years to the 2027-28 financial year. The scheme supports the installation of EV charging infrastructure in eligible carparks of existing private residential buildings; and
- $8.4 billion for carrying out drainage improvement works in various districts to shore up our defenses against flooding.
No doubt, there are many climate-change challenges ahead. But there are also significant opportunities to develop a circular and green economy. We estimate that in the next 15 to 20 years, the Government's expenditure on various measures to combat climate change may reach $240 billion. Private enterprises are also expected to invest heavily in decarbonisation. The enormous spending to drive low-carbon transformation will accelerate the development of green and sustainable finance as well as green industries in Hong Kong.
The development of green and sustainable finance in Hong Kong has the staunch support of our country. The Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) supports Hong Kong's development into a green finance centre in the region. More specifically, the Opinion on Providing Financial Support for the Development of the GBA, which was promulgated by the Central Government, supports GBA entities and financial institutions to make use of the Hong Kong platform for the financing and certification of their green projects. The Opinion also encourages Guangdong incorporated financial institutions to issue green bonds and other green financial products in Hong Kong.
In fact, our green and sustainable finance market is flourishing. The volume of green and sustainable debt arranged and issued in Hong Kong last year reached a record high at US$57 billion, which quadrupled from a year ago. Of this, the volume of green and sustainable bonds amounted to US$31.3 billion in 2021, accounting for one-third of those issued in the Asia market, and making us number one in the region.
I announced in this year's Budget that we would continue to issue green bonds totaling about US$4.5 billion or equivalent this year. Since the launch of the Government Green Bond Programme in 2018, we have successfully issued bonds totaling close to US$10 billion equivalent, which were all well received by investors. These issuances achieved a number of breakthroughs. For instance, the US$2.5 billion of green bond we issued in February last year was the world's largest US dollar government green bond deal at that time, in which the 30-year tranche was even the longest tenor US dollar green bond issued by governments in Asia.
We later issued around US$4 billion worth of green bonds in November and included the euro tranches and renminbi (RMB) tranches for the first time, in which the 20-year euro tranche was the longest tenor euro government green bond in Asia at that time.
Recently, we issued our first retail green bond of $20 billion – the largest retail green bond issuance globally so far. By participating in green finance, our local residents not only could directly contribute to greening Hong Kong, but also share the fruits of our sustainable development.
Apart from Government Green Bonds, green bonds issued by other bodies or organisations also play a key role in our infrastructure projects. In January, Airport Authority Hong Kong successfully issued its inaugural US$1 billion green bond as part of its jumbo US$4 billion multi-tranche issuance. The green bond was also heavily oversubscribed with global green investors accounting for nearly 60 per cent in the final allocation.
We encourage issuances of green and sustainable bonds and loans in Hong Kong, and we continue to promote our Green and Sustainable Finance Grant Scheme among market players with a view to establishing a holistic green finance ecosystem. We have lowered the minimum eligible loan size for subsidy from $200 million to $100 million for covering their external review costs under the scheme. As at late May 2022, close to 100 applications have been approved, involving a grant amount of about $100 million covering various kinds of green and sustainable debt instruments.
And there are more positive developments worth noting. In October last year, the Shenzhen Municipal People's Government issued offshore RMB municipal government bonds totalling RMB5 billion in Hong Kong, RMB3.9 billion of which were green bonds. That was the first time a Municipal Government issued bonds outside the Mainland, which is significant in terms of helping to enhance our status as the green finance centre in the GBA and our strategic role as the gateway to the Mainland, facilitating the flow of international capital to green projects in the Mainland.
In view of the growing business opportunities related to green and sustainable finance, we can expect increasing demand for financial professionals with relevant skills and know-how. With this in mind, we will launch a three-year Pilot Green and Sustainable Finance Capacity Building Support Scheme. Under the scheme, subsidies will be provided for the training and acquisition of relevant professional qualifications.
We have also been working with financial regulators and the industry to promote green and sustainable finance. The Green and Sustainable Finance Cross-Agency Steering Group (Steering Group), formed in 2020, is working full steam together with the financial sector and relevant stakeholders to take forward its strategic plan, with focuses on regulatory policy, market development and carbon market opportunities. The primary objective of this collaborative effort is to bolster Hong Kong's position as a regional green and sustainable finance hub.
The Steering Group published in March a preliminary feasibility assessment for Hong Kong to pursue carbon market opportunities and plans to develop Hong Kong into a global, high-quality Voluntary Carbon Market. The Steering Group is considering the most appropriate market and regulatory model, and will formulate the next steps after consulting market experts and relevant authorities.
Separately, the Hong Kong Exchanges and Clearing Limited (HKEX) signed Memorandums of Understanding with the Guangzhou Futures Exchange and the Guangzhou-based China Emissions Exchange respectively to explore cooperation opportunities in green and low-carbon market. Moreover, Hong Kong's first carbon futures Exchange Traded Fund (ETF) was listed on the HKEX in March, which extends the coverage of Hong Kong-listed commodity ETFs to carbon credits, an important asset class in the global drive to achieving carbon neutrality.
Ladies and gentlemen, achieving the goal of carbon neutrality before 2050 will require the participation and support of the whole community. The public and business sectors can contribute by practising a low-carbon lifestyle and work environment through energy saving and waste reduction and recycling, etc. I hope that various sectors of the community will join hands with the Government in a bid to strive towards the goal of carbon neutrality and build a bright and sustainable future together
I wish this inaugural Summit a great success and I hope you all have a "green" and prosperous year ahead.