Financing a greener future

Sustainable finance has attracted growing attention in infrastructure development given its beneficial impact on investors, financiers, project owners and the project location, delegates heard. The Hong Kong Monetary Authority’s (HKMA) Infrastructure Financing Facilitation Office (IFFO) is an active player in facilitating infrastructure investments and financing, and the IFFO recently set up the Centre for Green Finance (CGF) to build capacity and experience, as well as acting as a depositary for knowledge and expertise.A panel at the summit, comprising both public and private stakeholders, looked into the business case for adopting sustainable finance in infrastructure projects and shared insights on the latest industry trends and offerings in this aspect.Darryl Chan, Executive Director (External) at the HKMA and Deputy Director, HKMA IFFO, chaired the session and pointed out that following ESG allows for risk-adjusted return. Neil Johnson, Managing Director, Macquarie Infrastructure and Real Assets, Macquarie Asset Management, said his firm put ESG at the centre of its business. ESG should not just be seen as a cost, but as a bringer of opportunity, he said. Renewable power is likely to soon outdo fossil-fuel power in economic terms, creating many opportunities. Michael Barrow, Director General, Private Sector Operations Department, Asian Development Bank (ADB), said ESG is in the bank’s DNA, and that all projects are screened for acceptability. ADB is needed to fill in gaps where the private sector will not step in, such as financing a 10-megawatt solar power plant in Kandahar, southern Afghanistan. The bank also creates unusual partnerships for innovative projects such as a link-up between mainland petrochemical firm Sinopec and a geothermal company from Iceland to develop geothermal heating. Corporations also seek ADB as a partner to enhance their ESG credentials, as European oil giant BP did when it was carrying out a development in West Papua, Indonesia.Mr Barrow pointed out that the switch to renewable energy means many investors fear that coal-based power-generation facilities could become stranded assets, so many investors have started to steer clear of coal.Mukhtar Hussain, Group General Manager, Head of Belt & Road Initiative and Business Corridors, Asia Pacific, HSBC, said much of the motivation to adopt sustainable principles comes from customers who want to know whether HSBC sticks to these principles. Driving the transition to a low-carbon economy is a key objective and the Belt and Road offers an opportunity to do so, creating an opportunity to develop open, clean and green policy.

Herbert Hui, Finance Director, MTR Corporation Limited, said the MTR is by nature a green firm – each train carries 1,500 passengers, cutting the need for a great deal of road traffic. A railway company that also has an extensive property portfolio, the MTR has to invest sustainably, he said, because it has a longtime horizon – up to 50 years.Mushtaq Kapasi, Managing Director and Chief Representative, Asia Pacific, International Capital Market Association (ICMA), said his group is a pioneer in green finance standards. Green bonds are defined based on four principles – use of proceeds, degree of disclosure and process for project evaluation, management of proceeds, and reporting. ICMA’s principles have influenced the mainland’s decision-making on green bonds. The European Union (EU) is also set to introduce a green bond standard.