Sustainable finance, a major driver of the sustainable transition

In Hong Kong, corporations, NGOs, financial institutions, and government agencies have worked together to promote sustainable finance through various initiatives. An active player in the financial industry is HSBC. Carrie Ng, Head of Sustainable Finance for HSBC Commercial Banking Hong Kong, walks us through sustainable finance in Hong Kong and discusses HSBC’s prominent role in its development.

Could you tell us what sustainable finance means to HSBC? Why is it so important?

If I go practical, sustainable finance is providing capital to sustainable activities. To limit the global temperature increase to 1.5 degrees[1], a lot of new technologies and new ways to operate require finance. Banking is one of the few, if not the only, able to move capital – billions and trillions – towards these activities.

Sustainable finance isn’t limited to innovation: it can fund sustainable initiatives or “Green Projects” within traditional companies. For example, a new water processing for textile companies, solar panels installation, or transitioning from diesel to electric vehicles for others… Sustainable finance covers different aspects of ESG, including, in addition to climate change or biodiversity, social issues like affordable housing. Having sustainable finance accessible to businesses is essential if we, as a society, want to meet the climate goals set by the Paris Agreement as well as effectively address other protracted social issues.

How is sustainable finance concretely advancing a net-zero economy?

On the client side, I see companies changing the way they operate. ESG is not only a disclosure exercise, it’s really driving change. For the society, the positive impact is concrete. For instance, HSBC rolled out a sustainable finance solution tailored for taxi operators, looking to take up hybrid vehicles in Hong Kong. It’s to support the public transport sector’s efforts to reduce LPG consumption and CO2 emission. Our Bank also supported the Hong Kong SAR Government in their issuance of  green bonds, and investors can access the government’s Green Bond Report to see what they are concretely supporting, like a recycling centre or green public facilities[2].

[1] To curtail the most catastrophic effects of climate change, in 2016, over 190 countries signed the Paris Agreement, a legally binding agreement to reach a net-zero world by 2050.

[2] Hong Kong Government Green Bond Programme – Report (hkgb.gov.hk)

“The ultimate goal is that one day, we may no longer need the “sustainable” adjective as all finance will be sustainable.”

Is sustainability an imperative for companies looking for investment in 2023?

A company with no sustainability roadmap can still access finance, but it’s rare to see a company not already considering sustainability. Often, companies already have sustainability or ESG elements in their strategy and plans. If not, it’s only a matter of time that their stakeholders will ask for such considerations.

Moreover, if a client is able to knit the Environmental, Social, and Governance metric targets together and access sustainability-linked loans, they may be able to benefit from preferential interest rates through meeting agreed sustainability performance targets. Even though environmental metrics are typically easier to measure, in recent years, more companies have come to us with social-related metrics, for instance, an increased gender diversity on the board or at senior management level, or hiring people with disabilities.

How has HSBC advanced sustainable finance in Hong Kong and the Greater Bay Area?

HSBC has a diversity of sustainable solutions – for instance green loans, social loans, and sustainable-linked loans, and sustainable supply chain finance – for companies to achieve their transition to a low carbon economy. In addition to the wide spectrum of finance solutions, we partner with other organisations to provide a suite of support to help companies learn more on sustainability topics and achieve what they want to do. For instance, our free training HSBC ESG Academy is designed to help SMEs understand how ESG practices can create and protect long-term business value. We also partner with Diginex to provide an online platform for companies of all sizes to report on ESG and carbon footprint. In May 2022, we also launched the GBA Sustainability Fund – a USD 5 billion fund to support sustainable activities in the Greater Bay Area.

Photo courtesy of HSBC

“The ultimate goal is that one day, we may no longer need the “sustainable” adjective as all finance will be sustainable.”

What challenges is sustainable finance facing?

First, companies are at different stages of their net zero journey . We need to work faster and at a wider scale. We do need to bring everyone onto the journey, across sizes, across industries. Second, it’s a huge collective exercise which is both an opportunity and a challenge. Promoting sustainable finance and sustainability requires everyone to collaborate – financiers, businesses, government, NGOs,etc.. Sustainability is also a constantly moving landscape with a whole host of trends. HSBC represents a voice in the banking industry to help customers navigate their way.

How do you foresee the future?

The most pressing challenge is that we have to transition our economy in a timely manner. We do have to really speed up the pace of transition to reach the 1.5 degrees target of the Paris Agreement. Banks will still need to deliver finance on net-zero solutions in decades to come. As a reference, the International Finance Center’s 30 by 30 zero Programme  helps the banking sector increase climate-related lending to 30 percent with zero or near zero coal exposure by 2030. In the banks, sustainable finance will become much more embedded in everyone’s job. The ultimate goal is that one day, we may no longer need the “sustainable” adjective as all finance will be sustainable.

How does your purpose at work show in your daily life?

I am trying my best to live sustainably through simple things. There is a recycling station where I live. My family keeps sorting our trash like we did when living in Guernsey, where we had to pay for throwing away regular trash, so it has become a habit. When I go shopping, I bring my tote bag. At the office, the team brings our own cups and food containers for takeaways. We can all play our part!