As climate risk factors become more relevant to investors, the market has realized that there are not enough green investment products available, especially in terms of diversification. A new innovative project in the Guangdong-Hong Kong-Macau Greater Bay Area (GBA) shows promising opportunities in this space.
The green investing concept is fast becoming popular among Asian issuers and investors, with asset classes like green bonds expanding aggressively. According to the Climate Bonds Initiative, the market is expected to see a total issuance of US$350 billion in new green fundraising projects for the whole of 2020, up 36% from last year.
Despite the promising green bond market, Asia still needs a more diversified green investment environment. “There are not enough green investment products in the market yet. As such, it is hard for most investors to invest in green even if they want to," says Ben McQuhae, vice president and special advisor to the chairman of the Hong Kong Green Finance Association (HKGFA).
To address the pain point, new products and projects are being developed. In the GBA, with the launch of the Greater Bay Area Green Finance Alliance (GBA-GFA) earlier this month, the market can expect to see more collaborations and innovations in creating new funding channels and investment products in the green finance space.
A blockchain solar project initiated by HKGFA is one such innovation. “We are looking to securitize the revenue generated by the solar panels in the form of digital investment or security token, which has been sold into the market as a means of refinancing the projects, thereby releasing capital for deployment in new projects," says McQuhae. "In high-density cities such as Hong Kong, there is little open space and the solar projects tend to be very small, and as such, tend to be unbankable using traditional project finance."
The thinking behind such a project is to maximize the solar energy potential of high-density cities like Hong Kong through new and innovative funding solutions, which will hopefully increase renewable energy and bring new classes of digital investment products to the market, he notes.