Hong Kong has surpassed Singapore as a green finance hub, with budgets published from the two respective cities revealing significantly different goals.
According to a report from Sustainable Fitch, a research firm in ESG investment: “The sharper focus in Hong Kong’s budget on boosting green business indicated the segment’s importance to the region’s long-term financial services industry strategy.”
During the pandemic, Singapore was able to keep its investment superiority due to the Singapore Exchange (SGX) owning the biggest listed volume of green, social, sustainable and sustainability-linked bonds in Asia. However, its 2023 budget is more focused on the social aspects of ESG, rather than the financial ones.
In particular, Singapore is now focusing on the post-pandemic recovery, which entails addressing the rise in inflation and safeguarding the population from a social point of view, while also supporting the city’s economic situation and cost of living crisis due to rising inflation. The city-state shines a light on welfare issues, from social inclusion and integration of paternity leave to falling fertility and even the ageing population. Singapore’s green transition, therefore, has been put on the back burner for now, with not even one comment about its carbon tax.
On the other hand, Hong Kong’s budget mostly revolves around green finance and sustainability-linked investment.
What does Hong Kong’s budget mean for green finance?
With the objective of carbon neutrality by 2050 in mind, Hong Kong is set on a “clear roadmap”, as CEO of HSBC, Hong Kong, Luanne Lim said, to reach its green finance goals.
The government sold a $102m 365-day tokenised green bond at 4.05% in February 2023. In this particular financial asset, beneficial interests in the bond are recorded upon settlement in the tokenised securities accounts on a private blockchain network. This was the first tokenised green bond issued by a government globally and it signals a further development in sustainable finance practices.
“Hong Kong has been proactively promoting the application of innovative technologies in the financial field, and is actively exploring new concepts and technologies to enhance the efficiency, transparency and security of financial transactions,” Paul Chan, the city’s financial secretary, said.
Lim and Chan outlined four extra goals:
- Issue $5.75bn in government green bonds in various currencies.
- Continue issuing grants under the government’s three-year Green and Sustainable Finance Grant Scheme, launched in 2021 to support eligible bond issuers and loan borrowers to pay their dues on bond issuance and external review services.
- Launch a Green Tech Fund for research and development projects.
- Introduce an international carbon marketplace to trade voluntary carbon credits and instruments, called Core Climate by the Hong Kong Exchanges and Clearing Limited (HKEX).
The aforementioned report also states that “We believe Hong Kong’s efforts to bolster its infrastructure and support sustainable finance and technology as being in line with the territory’s traditional strengths as an offshore financial centre for greater China.”
On paper, there is enough funding in the green and sustainability-linked market in Asia to support at least two big financial hubs at the same time, rather than one prevailing on the other. Financial markets specialist Adrian Murdoch wrote for Capital Monitor: “The fight for financial primacy between the two centres will, inevitably, continue – but for the moment at least, Hong Kong appears to be in front.”