Asia, home to five of the world’s 10 largest emitters and responsible for approximately 45% of global greenhouse gas emissions, is a key player in the global push towards achieving net-zero carbon emissions. To discuss this pressing issue, The Asset Events, in collaboration with MUFG, as part of the MUFG N0W series, brought together stakeholders and bankers on October 17 in Hong Kong.
During his opening remarks for the event, Hiroshi Masaki, head of MUFG Bank’s Hong Kong branch, emphasizes the severity of climate change. “Climate change is one of the most serious challenges facing the global community,” he says. “Our long-term goal is to strive towards a net-zero world for the sake of future generations.”
As well, Masaki, highlighting Hong Kong’s integral role as an international financial hub and gateway to mainland China, underscores the city’s commitment to confronting the climate transition challenge head-on and unlocking new opportunities.
To that end, Hong Kong has issued around US$80 billion worth of sustainable loans and bonds in 2022, marking a more than six-fold increase over two years. The city also, according to data from the Hong Kong Monetary Authority, captures approximately a third of Asia’s international sustainable bond market.
Colin Chen, the head of ESG finance for Asia-Pacific at MUFG Bank, another speaker at the event, reiterates the bank’s dedication to facilitating Asia’s transition towards net zero. “We appreciate that Asia’s landscape is unique and our decarbonization strategy will not be the same as it is in Europe or North America. Our Asian Transition white paper, due for release at the end of November in time for COP28 [the 28th United Nations global climate talks in the UAE], outlines our commitment to establishing ourselves as the leading sustainable impact finance bank in Asia.”
Cooperation is key
During a fireside chat at the event detailing Asia’s decarbonization journey, Ricco Zhang, senior director for Asia-Pacific at the International Capital Market Association, reminds attendees that green bonds are still the main product, but notes that social bonds account for around 20% of the overall sustainable bond market.”
However, Tomohiro Ishikawa, chief regulatory engagement officer at MUFG Bank, points out the significant financing gap for sustainable projects in Asia and emphasizes the need for public-private partnerships. “The magnitude of the challenge we face in transitioning to a sustainable future is vast, and it's something that cannot be tackled by any single entity,” he shares. “The financing gap for sustainable projects in Asia is significant.
“It’s crucial that we foster strong public-private partnerships to address this. The public sector can play a pivotal role in taking on certain risks, thereby making these projects more bankable. This collaboration is not just advisable, it’s necessary. We must work together, pooling our resources and expertise, to drive sustainable progress forward.”
Investment opportunities
During the panel discussion following the fireside chat and featuring input from various participants, Johnny Yu, head of sustainability at Henderson Land Development, speaking about his company’s commitment to sustainable practices, explains: “We are not just focusing on reducing carbon emissions, but also on creating sustainable communities. This includes building green buildings, promoting renewable energy and enhancing waste management.”
Yu also mentions the complexities involved in assessing a company’s carbon footprint. “The tricky part will be on Scope 3 emissions. And, as we have so many projects going on at Henderson, we have to think about our upstream and downstream activities – upstream activities being, for example, the purchase of capital goods, and downstream being tenants’ usage of energy. We have to work with our tenants and partners to get all of this information.”
Francis Ho, senior director, group treasury and project finance at CLP, offers a perspective on how Hong Kong’s limited energy resources are influencing the company’s strategies. “We’re looking to expand our business overseas in areas such as China, Australia, India and certain Southeast Asian countries where there are more opportunities for renewable energy generation. We’re also investing heavily in digital technologies to improve our efficiency and reduce emissions.”
Vignesh Shanmugasundaram, head of Asia-Pacific investments for infrastructure solutions at Blackrock, shares his view on the importance of aligning capital allocation with long-term structural trends. “We’re currently seeing a massive shift in the industry, and decarbonization is a key focus. There’s a growing demand for investment in green infrastructure, and we’re committed to addressing this need.”
As well, Shanmugasundaram further points out that data centres are one of the most active areas of investment. “Data centres are some of the most power-hungry assets you can imagine. And they’re becoming more power-hungry over time. It’s just that the volume of data is increasing, especially with AI [artificial intelligence]. So, what we’re looking for is really to align to the requirements of customers. Customers here mean hyperscalers like Google, Amazon, Facebook and Microsoft.”
Speaking during the event’s closing remarks, Richard Yorke, head of global corporate and investment banking for Asia-Pacific at MUFG Bank, reinforces the importance of collaboration to achieve net zero. “The city’s long-term fundamentals remain, and my team and I fully intend to harness its advantages to better connect our global and regional clients in mainland China, while facilitating greater access for Chinese and Hong Kong corporates to the rest of Asia and beyond through MUFG’s worldwide network.”
