This is according to experts who spoke on a sustainability panel organised by independent regional trade association Asia Securities Industry & Financial Markets Association (ASIFMA) at its recent annual conference in Hong Kong.
A greater policy push – akin to China’s – would incentivise the city’s investors and market to take environmental, social and governance (ESG)-related initiatives more seriously, and in doing so, also place Hong Kong among cities that have arguably more concrete net zero plans, such as Singapore.
“Ultimately, government policy is important,” said Paul Chow, general counsel and group chief sustainability officer of the Hong Kong Exchanges and Clearing Limited (HKEX), which owns the Hong Kong Stock Exchange.
“For example, if you look at Singapore, the [city] has a carbon credit market and a government that has imposed a carbon tax; [they] have a national driver for carbon credits. But in Hong Kong, it is still voluntary,” he said.
Singapore was the first Southeast Asian nation to implement a carbon tax in 2019. The levy was then priced at S$5 (US$3.70) per tonne of carbon dioxide equivalent (tCO2e), covering roughly 70 per cent of the city-state’s emissions such as its manufacturing, power, waste and water sectors, then raised to S$25 (US$18.53) per tCO2e on 1 January 2024. It will be hiked further raised to S$45 (US$33.36) per tCO2e by 2026.
Hong Kong, on the other hand, does not have a carbon tax nor a mandatory carbon market, but a voluntary carbon market called Core Climate, which HKEX launched in 2022. The city has pledged to halve emissions by 2035 and achieve net zero by 2050, but has not set interim or nearer-term climate goals.
The Hong Kong government has not done enough to inform businesses on the potential uses of carbon credits too, Chow said. This leaves uncertainty and is impeding the progress of the city’s carbon credit market.
“I wouldn’t say carbon credits are a very mature financial product; there are always questions surrounding their integrity and additionality,” said Chow, referring to the emissions reductions that would not have taken place without the financial support from the sale of carbon credits. “But there is a role for carbon credits. The problem is that not a lot of people understand them,” he added.
In a bid to address this uncertainty surrounding carbon credits among businesses, HKEX has been both advocating their importance to the government and informing listed companies on the topic, Chow noted.
On the other hand, China has its own mandatory carbon market called the National Emissions Trading System (ETS), which the country launched in 2021. It initially covered the power sector, which is responsible for about 40 per cent of the nation’s carbon emissions, but was expanded in 2024 to cover high emission sectors like those in cement, steel, and aluminium, increasing coverage to about 60 per cent of emissions.
The country also has a voluntary carbon market (VCM), called the China Certified Emission Reduction (CCER) scheme, which was also finally launched in 2024 following multiple delays.
While Hong Kong boasts its own VCM, only about 900,000 tonnes of carbon emissions – or less than 1 per cent of the global total – have been traded. Core Climate allows traders to settle in both Hong Kong dollars and Chinese renminbi, but the lack of links with carbon exchanges in China has been blamed for the low amount of carbon transactions so far.
The city could consider forging links with China’s carbon market to address the low level of carbon trades, Chow added.
“As a super-connector, we [hope to] connect with China on this front. We run a very successful Stock Connect and Bond Connect, so naturally, we also think about this space as well,” he said, pointing to two examples of financial initiatives that facilitate cross-border investments between China and the world through Hong Kong.
Panellists speaking on a sustainability panel at the ASIFMA annual conference on 17 February 2025. From left: Christine Loh, chief development strategist, Hong Kong University of Science and Technology; Ruth Shapiro, chief executive, Centre for Asian Philanthropy and Society; Chen Xue, team head, Credit & ESG Advisory Origination (Licensed), Global Financial Markets, DBS Bank; Paul Chow, group general counsel and group chief sustainability officer, HKEX; and Diana Parusheva, managing director, public policy and sustainable finance, ASIFMA, who was the moderator. Image: Jeremy Chan / Eco-Business
Lack of market stimulation
Clearer direction from the Hong Kong government would also help to stimulate the market and direct capital to sustainability initiatives, noted Christine Loh, chief development strategist at the Hong Kong University of Science and Technology.
Loh highlighted Singapore’s government-led “30 by 30” food security goal – which aims to ensure that 30 per cent of the city-state’s nutritional needs are met locally by 2030 – and noted that such initiatives can drive investments.
“We need more ‘marriage’ between policy and what the market is prepared to do or complement. When the government puts a goal out there, it excites the market, excites new money that comes in, and excites people out there who have ideas,” Loh said.
Setting nearer-term climate goals could help Hong Kong retrofit property with more energy-efficient features, suggested Loh. The city is home to over 9,000 high-rise buildings and more than 4,000 skyscrapers above 100 metres tall and needs to decarbonise its real estate sector, which accounts for over 90 per cent of electricity consumption and 60 per cent of Hong Kong’s emissions.
“If the Hong Kong government were to say: ‘We have a problem; we have old and energy-inefficient buildings; our energy costs will be much higher going forward; and we want to seriously make the retrofitting of buildings a big deal here,’ [this] would set a goal. The policymakers [must] then work with the financial regulators – not the other way around. By having a policy out there, there is market control,” explained Loh.
Ruth Shapiro, chief executive of the Centre For Asian Philanthropy and Society, also agreed that government leadership is a key factor in Hong Kong’s commitment to decarbonisation and net zero, and could influence a large majority of companies in the region.
“Eighty-five per cent of all companies in Asia are family-dominated – they want to stay in business, and they want the government to [take] the lead. There are many examples of people trying to be in line once the government sets policy,” she said.
Detailed decarbonisation policies could direct philanthropy in the right direction, Loh added.
“If we can get policymakers, financial regulators, the private sector, philanthropy, to all come together to create a giant market and funnel in the technology and the money, that’s how Hong Kong and other cities can get it done,” noted Loh.
Aligning with ‘China 2.0’
Hong Kong’s role as a gateway for international companies to access China was widely discussed in another panel discussion on “China 2.0?” at the 2025 ASIFMA Conference – with the panel title a reference to the country’s ambitious plans to transform its economy through investments and policies to lead as a global economic powerhouse.
China has vowed to peak carbon emissions by 2030 and achieve net zero by 2060 as part of its current Nationally Determined Contributions (NDCs). While the country remains the planet’s largest carbon emitter, it surpassed its renewable energy target in mid-2024, with renewables contributing close to half of total power generation.
The nation also announced a new Energy Law at the beginning of the year to consolidate decades of fragmented energy policies into a single strategy. The law mandates a minimum share of renewable energy sources in power consumption and establishes a legal system to manage carbon emissions and carbon intensity.
Speakers on the panel brought up a concept – new quality productive forces, or NQPFs – that has emerged in China’s official economic strategy lately, which sees the nation pivoting from traditional industries to focus on innovation and technology, as well as green and low-carbon development to drive quality growth.
Leo Shen, managing director and general manager of China-based fund manager Allianz Global Investors Fund Management Company, said the NQPF concept will drive developments in artificial intelligence (AI), energy and electric vehicles.
China’s electricity cost, which is comparatively lower than that in Europe or the United States, would also help drive green economic growth, he said, citing the recent emergence of DeepSeek as an example of how China’s innovation-focused policy and low cost of electricity can bring about new technological disruptions.
China’s AI model DeepSeek R1 wiped US$1 trillion off US capital markets in January over concerns that infrastructure that powers modern-day AI bots – previously believed to be only accessible through expensive chips from US chip giants – could be superseded by far cheaper alternatives.
Speakers at the ASIFMA annual conference discussed China’s next phase of economic growth policies. From left: Thomas Fang, head of China Global Markets, UBS; Huiqi Pei, deputy director of International Cooperation Department, Shenzhen Stock Exchange; Leo Shen, general manager, Allianz Global Investors Fund Management Company Co., Ltd.; Xiaoyan Zhang, chair professor of finance & associate dean at PBC School of Finance, Tsinghua University; and Lyndon Chao, managing director – head of Equities and Post Trade, ASIFMA, who was the moderator. Image: Jeremy Chan / Eco-Business
Hong Kong’s proximity to China is likely to remain an advantage in the long term, said speakers at the ASIFMA conference. It can attract and direct investments from both China and the world with its talent and through its financial infrastructure initiatives.
For example, investors can leverage financial platforms such as Shanghai- and Shenzhen-Hong Kong Stock Connect, Bond Connect, Wealth Management Connect, and Swap Connect – all of which allow them to easily access financial markets such as equities, bonds, wealth management products and interest rate swaps.
A view of Shenzhen’s skyline in the distance as viewed from Hong Kong’s Yuen Long district. Investors can trade shares on both Hong Kong and Shenzhen’s stock exchanges through the Shenzhen-Hong Kong Stock Connect. Image: Kamal Mirwani / Hong Kong Hike
China’s green bond market was the world’s largest in 2023, with the country issuing US$131.3 billion in sustainable debt that year, according to a June 2024 study by the Climate Bonds Initiative. The same report found that Hong Kong issued US$18.2 billion in green bonds in 2023, representing a growth of 236 per cent compared to the previous year, making the city the fifth largest sustainable debt issuer globally.
Another September 2024 report by the Hong Kong Trade Development Council found that because awareness of green financing in China remains relatively low, many China-based businesses view Hong Kong as the first choice for sourcing professional services in sustainability. China may also be intent on helping Hong Kong to decarbonise, as much of the city’s financed emissions have been found to stem from investments within China.
“Hong Kong is already the largest offshore renminbi clearing centre,” said Shen, referring to the clearing and settlement of renminbi transactions for international trade and investment. “That means [there could be] more policy to drive money to Hong Kong to invest overseas. We have seen Stock Connect, Bond Connect, Wealth [Management] Connect and maybe later, [we will see] many other connects.”
“In China, Shanghai is a very important financial centre, but there are constraints. [For example], the asset classes we can invest in China, to be very frank, [do not extend] offshore. Because Hong Kong is so close to China, [the city can] help investors in China to invest offshore,” he added.
Being the world’s dominant offshore renminbi clearing hub has helped China’s capital market to expand in recent years as well, noted panellist Huiqi Pei, deputy director of the International Cooperation Department, Shenzhen Stock Exchange.
“As China’s capital market opens more, Hong Kong will [play an even] more important role,” said Pei, adding that Shenzhen-Hong Kong relations are particularly unique because of their geographical adjacency.
“I asked a DeepSeek a question this morning, out of curiosity,” said Pei, referring to the AI chatbot that can provide answers to various prompts or questions. “I asked, ‘If I drive from my home [in Shenzhen] to this venue [in Hong Kong], how many traffic lights would I encounter?’ [I was told] that there would be nine. I then asked, ‘If I drive from my home to my office at the Shenzhen Stock Exchange, how many traffic lights would I encounter?’ [I was told] that there would be 14. We have this advantage.”
With Hong Kong’s focus on becoming the region’s climate finance hub – coupled with the city’s ranking as the seventh largest stock exchange globally by market capitalisation as of December 2024 – it can be argued that investors in China are likely to continue accessing international climate capital through Hong Kong and vice versa.
Such developments will further strengthen Hong Kong’s super-connector role, said Shen.
“The city’s knowledge [can] help China to understand the international environment [and vice versa]. Hong Kong should be able to help international companies to further understand China by interpreting Chinese policy and what is happening [within] the capital market,” he said.
Themed “Mobilising capital for the green transition”, the Hong Kong edition of Eco-Business’ flagship forum Unlocking capital for sustainability finance will be held on 27 March 2025. Find out more details here.
