CARE2022 Hong Kong Conference

72 6 Financing the Climate Transition which required measuring and reducing up-and-down stream emissions with targets and timelines. For a large property developer to go green and become socially sustainable, support from banks was essential – its standby loan facilities amounted to HK$28 billion from 10 banks in 2021. Two examples showed its commitment in sustainability: (i) the Kong Ha Wai transitional housing project to help alleviate adverse living conditions for those waiting for public housing in Hong Kong;21 and (ii) receiving the Business Leadership in Sustainability Award at the Asia Pacific Leadership in Green Building Awards 2022, organized by the World Green Building Council. • Shui On Management Limited The built environment generates 40% of annual global carbon emissions. Of those, building operations were responsible for 27% annually, while building and infrastructure materials and construction (embodied carbon) contributed an additional 13% annually.22 Shui On had rethought how to construct new buildings in more sustainable ways, such as through the extensive use of Modular Integrated Construction (MiC) technology23 which also resulted in a safer working environment and faster construction time. Beyond new buildings, retrofitting existing buildings was essential to improving the aging building stock in Hong Kong. For example, Shui On was currently going through the retrofit of its 30-yearold flagship building, which would improve its performance when completed, and it would also benefit landlords and tenants. While necessary, obstacles to retrofitting buildings were considerable – such as getting agreement from multiple owners, disrupting leases and loss of income, and high capex for major hardware replacements. Shui On’s strategy to creating a retrofit business had to first reduce the obstacles, such as promoting retro-commissioning services through creating software for building owners to manage energy and building operation better by using data, which is less disruptive and less costly. However, replacing air-conditioning systems and elevators could not be avoided because the performance of aged equipment could only improve by a small margin. Considering the importance of retrofitting buildings to the climate agenda, as well as refreshing the building stock, government policies were needed to incentivise owners. The HKSAR Government’s scheme to subsidise the purchase of EVs could be adapted and applied to buildings retrofits for high gains for society and climate. Furthermore, a case could be made for the emissions reduction from retrofits to be considered carbon credits, which would be another incentive. Finance under green pressure PAG is a homegrown asset manager in Hong Kong operating across Asia with over 600 staff and over US$55bn in assets under management.24 PAG emphasised the significance of the asset management industry to Hong Kong, and that it was a driver of growth in Asia. Many of PAG’s investors – pension funds, insurance companies, sovereign wealth – had higher and higher ESG and climate expectations of not only PAG’s own performance but also that of the 40+ companies it controlled and owned in its private equity portfolio. In fact, all investments were facing green pressure. Most large sources of capital expected return on capital and green performance and buying carbon credits was less optimal than businesses reducing their emissions and getting customers to compensate them for being green. A significant challenge was finding firms that could help measure and verify emissions data and green performance in a credible way to improve accountability and reduce “greenwashing”. Thus, the opportunity for Hong Kong to lead on measuring and verifying emissions was very large, not only for local projects but also on projects on the mainland and elsewhere. Collaboration between the public and private sectors in tracking and reporting on data would make Hong Kong a leader in the field. A mainland perspective In considering the mainland market and Hong Kong’s role, BEA’s experience was that the mainland generally “Do Big Things Fast” and tended to overachieve. However, from a banker’s perspective, in assessing risks, the key was to “do the small things right”, the importance of which could be summarized using the acronym “E, F & G”. “E” stood for green externalities. On the mainland today, “everyone is doing green” because that was a key national mandate. The market for EV Panel 1 discussion