Sustainable Infrastructure Finance on the Belt and Road
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China’s Belt and Road Initiative (BRI) is producing vast, often multilateral, infrastructure projects across Asia, creating huge demand for long-term sustainable infrastructure financing.
According to the Asian Development Bank (ADB), developing countries in Asia require at least $23 trillion worth of infrastructure investment from now until 2030, and an additional $3 trillion is needed for climate change mitigation.
This enormous demand for investment, which will require both public- and private-sector participation, has stimulated innovation in infrastructure financing. One area of focus is sustainable investing.
Chinese President Xi Jinping has said that BRI must be green and sustainable and environmental protection must underpin the initiative “to protect the common home we live in.”
The Environmental, Social and Governance (ESG) risks associated with the lifespan of an infrastructure project, from design to construction, financing and operation, have direct impact on the financial and operational performances of businesses and assets.
Twenty-seven global financial institutions have signed up to the Green Investment Principles for the Belt and Road, which will incorporate low-carbon and sustainable development practices into the initiative’s investment projects.
Hong Kong, as one of the world’s leading financial centers and China’s international financial capital, is well positioned to leverage these opportunities, and it has already begun building the framework needed to become an international hub for sustainable finance. It can meet the requirements of green projects from green finance certification to legal and marketing expertise and advice.
The Hong Kong government is taking initiative to help foster the sustainable finance industry. Last year, Hong Kong’s green bond issuance totalled $11 billion, up from $3 billion in 2017, with issuers ranging from multilateral development banks to private sector corporations.
The government launched its first green bond in May 2019, and government bodies such as the Hong Kong Monetary Authority (HKMA) have adopted strategies to further develop the sustainable finance market.
Sustainable finance is not only about avoiding ESG risks, but also about opportunities such as achieving resource efficiencies, reducing environmental footprint, creating jobs, improving community relations and getting long-term risk-adjusted returns from infrastructure developments. There is a strong link between companies having solid sustainable finance strategies and delivering superior returns for their investors.
Belt and Road and its large-scale infrastructure financing gap create an opportunity for Hong Kong to build its sustainable finance industry. With coordinated efforts and innovation, Hong Kong can help shape a brighter, greener future for both investors and corporations.
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