CARE2022 Hong Kong Conference

69 A CFO’s decision-making 6 Financing the Climate Transition A CFO faces new challenges in the climate change era. Hong Kong Science and Technology Parks Corporation (HKSTP)15 has new buildings to construct and existing buildings to retrofit for better environmental performance to achieve climate goals but with higher cost implications. In considering the added costs, a CFO’s traditional way of evaluating a project’s capital expenditure investment was whether the rate of return of the project was greater than the hurdle rate.16 Today, a CFO must also take into account the organization’s carbon reduction targets determined by some common standards (such as SBTi17). The CFO’s mindset would need to adapt to a new way of measurement of success by achieving higher sustainability performance while managing the financial returns. Both aspects must be considered together. Reflection on two projects at HKSTP illustrated the unavoidable dilemma. One was a new building for developing new laboratories with three design options of varying carbon performance. The mid-performance option was chosen – while the higher performance option would reduce carbon by a larger margin at a higher cost of up to 47%, the midperformance option had sufficient reduction potential with up to 8% higher cost only, which was acceptable from a finance perspective. Another successful example was an upgrading project of a local District Cooling System, of which the saving in energy costs by the upgrading could payback the upfront investment of HK$200 million in 12 years. Aldous Mak, HKSTP