Green Infrastructure Investment Opportunities - THE GUANGDONG-HONG KONG-MACAO GREATER BAY AREA 2021 REPORT
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Green Infrastructure Investment Opportunities THE GUANGDONG-HONG KONG-MACAO GREATER BAY AREA 2021 REPORT Prepared by Climate Bonds Initiative Produced with the kind support of HSBC
Executive summary
In the Guangdong-Hong Kong-Macao Greater
Bay Area (the GBA), which consists of nine
cities in Guangdong Province and two special
administrative regions, i.e., Hong Kong and
Macao, the effects of climate change and the Low carbon transport
risks associated with a greater than 2°C rise
Overall infrastructure
• A total investment of USD135bn was
global temperatures by the end of the century • The major infrastructure projects in the
planned in rail transit during 14th FYP.
are significant due to its high exposure to natural 14th Five-Year-Plan (FYP) of Guangdong
hazards and vast coastlines. Province are expected to have a total • A total mileage of about 775 km are
investment of RMB5tn (USD776.9bn), of planned in the GBA, the total investment
Investment in low carbon solutions will be
which green infrastructure investment is about USD72.7bn.
essential for mitigating climate risk and meeting
is not less than RMB1.9tn (USD299bn),
global emission reduction pathways under the • Hong Kong plans to spend around
including rail transit, wind power,
Paris Climate Change Agreement. The Outline USD3.23bn for four new infrastructure
modern water conservancy, ecological
Development Plan for the Guangdong-Hong projects which include a railway line.
civilization construction and new
Kong-Macao Greater Bay Area (the GBA Outline
infrastructure construction.
Plan) issued by China’s State Council also
emphasises green development and ecological • Hong Kong states that the government
conservation. Given climate volatility as a result will spend USD12.9bn every year in
of global warming is already happening in infrastructure for the next five years.
the GBA as well as the Chinese government’s
• Macao government has initiated over 410
reinforced commitment to achieving climate
public construction projects, each worth
Sustainable waste
targets, all new infrastructure should support
USD125,313 or more in 2020, with a total
management
climate mitigation goals and be resilient.
value of USD1.7bn. • In the Pearl River Delta region, USD4.35bn
Green infrastructure: an opportunity was invested in the construction of waste
for growth treatment facilities for urban and rural
domestic waste during 13th FYP.
The GBA governments aims to develop billions
of dollars of new public works projects. There • Hong Kong set targets to reduce
are already green infrastructure projects and municipal solid waste (MSW) disposal rate
assets of many different sizes and technologies by 40% per capita by 2022, from 1.27kg to
undertaken across the GBA: Sustainable water 0.8kg per day.
management • Macao aims to reduce per capita MSW
• USD38.5bn investment was planned disposal rate by 30% by 2026 (based on 2016
in flood control, water supply, rural levels), from 2.11kg to 1.48kg per capita.
water conservancy and smart water
conservancy during the 14th FYP.
• The Guangdong-Hong Kong-Macao
Renewable energy Greater Bay Area Water Safety Guarantee
• Guangdong planned to build 5.54GW Plan was issued in Jan 2021.
wind capacity and 5.15GW capacity, and
allocated USD16.87bn investment in
New infrastructure
renewable energy during 13th FYP. • Guangdong plans to invest USD67.3bn
in the construction of new infrastructure
• About 30GW capacity of offshore wind
projects during the 14th FYP.
power with over USD69bn investment were
planned by the end of 2030 in Guangdong. • Over 700 projects with a total investment
Green Buildings of over USD153bn is set up in Guangdong,
• Hong Kong aims to increase the non-
• Guangdong has added more than 500 and the government estimates that at
fossil fuels electricity generation to 25%
million m2 of green building, the building least USD101.23bn will be invested from
for the medium term.
energy saving has accumulated 8.58 2020 to 2022.
• China Southern Power Grid Corporation million tons of standard coal energy
• Guangdong aims to build 200 hydrogen
has committed that the proportion of saving capacity, and urban green
fuelling stations by the end of 2022, and
installed clean energy in the GBA will buildings accounted for 62% of new
about 250,000 charging piles and 4,500
reach 80% by 2035. buildings during 13th FYP.
charging stations by the end of 2025.
• Hong Kong issued the Energy Saving Plan
• The investment associated with new
for Hong Kong 2015–2025+.
infrastructure projects is expected to total
• The Guangdong Province Green Building around USD1.43tn to USD2.51tn for the
Regulations issued in November 2020 is the next five-year period until 2025 in China.
first local regulation on green buildings.
The Guangdong-Hong Kong-Macao Greater Bay Area GIIO Report Climate Bonds Initiative 2Green finance comes into play Six recommendations for 4. Harmonisation of green definitions for
in infrastructure financing growing green infrastructure various sectors: The GBA brings together two
In order to attract investors looking for
investment opportunities Special Administrative Regions: Hong Kong and
Macao with nine cities in Guangdong, connecting
green, there needs to be a visible pipeline of To unlock the immense green infrastructure
onshore and offshore capital markets and having
infrastructure investment opportunities that investment opportunities in the GBA, this report
three legal systems present a great challenge
align with internationally accepted definitions provides the following six recommendations:
as well as excellent opportunity for the GBA in
of green. A large and visible GBA green
1. Promote green securitisation: Guangdong developing a harmonised green definition and
infrastructure pipeline could also help investors
Province is the second largest Green ABS- facilitate cross-border green investments into
to understand that there is a sufficiently large
issuing province in China and has experience on the region, especially in green buildings sector
pool of financially attractive investments that
issuance of low-carbon transport ABS. To attract where multiple standards and rating systems are
are also green. To this end, this report provides
investors to GBA’s green ABS market, the market implemented.
a sample pipeline that includes a list of ‘green’
has to provide more reliable data on credit
and ‘potentially green’ projects (70 in total) taken 5. Improve project visibility: Improving
quality, defaults, recoveries and etc., besides,
from various publicly available sources, using the visibility for green infrastructure pipeline in
the discrepancies between China’s local green
globally recognised Climate Bonds Taxonomy the GBA will make it easier to attract investors
definitions and the international ones need to be
and Sector Criteria to determine the green interested in looking for green. An opportunity
further bridged.
eligibility of projects. exists to develop an online database of green
2. Promote the issuance of local government infrastructure projects, listed by sector and
Currently, much of the investment in
green bonds: Establishing green municipal tagged as planned, under preparation or ready
infrastructure in the GBA is being carried out
finance for local governments to aggregate debt to offer.
through public funding and Public Private
requirements and access lower cost of capital,
Partnerships (PPP) ventures. However, public 6. Pave the way to green recovery with green
which requires the collaborative efforts of
funding is not sufficient to meet the growing infrastructure: In the post-COVID era, while
finance, environmental and other departments of
demand for green infrastructure; new channels countries around the world implement measures
local governments in the Guangdong Province in
will be necessary to mobilise private capital. to reduce and recover from the economic
identifying green infrastructure project pipeline
impacts of the global pandemic, they also need
That said, green debt instruments, such as green and assessing associated funding needs.
to address the existential threat posed by climate
bonds, green asset-backed securities, and green
Potential green municipal bonds in the change. The GBA governments are playing an
loans, have been increasingly deployed to raise
Guangdong Province, will improve GBA’s important role on these agendas. Integration of
funds for infrastructure projects in the GBA. As
strategies on climate change, including sustainability and resilience into infrastructure
China works towards achieving carbon neutrality
decomposing China’s Nationally Determined projects in the GBA will be conducive to raising
target, with a raft policy measures in growing
Contribution (NDC) to the local level, funds via green debt instruments.
green finance market from governments on both
development of regional decarbonisation
national and local levels, the potential of green
strategies and promoting the GBA to peak carbon
debt instruments as an infrastructure refinancing
emissions early.
tool will be further unleashed.
3. Leverage Hong Kong’s capital market to
support infrastructure development in the
GBA: Encouraging green infrastructure project
owners to tap the capital market in Hong Kong
with green debt instruments would help meet the
growing demand of global institutional investors
for onshore green assets, and at the same
time improve the alignment of those issuance
with international definitions such as Green
Bond Principles and Climate Bonds Standard.
Government incentives and GBA-wide capacity
building for issuers are key to accelerate offshore
green debt issuance.
The Guangdong-Hong Kong-Macao Greater Bay Area GIIO Report Climate Bonds Initiative 3About this report Contents
This report highlights green infrastructure The report is intended for a wide range Executive summary 2
investment opportunities in the Guangdong- of stakeholders, including domestic
Green infrastructure: an opportunity
Hong Kong-Macao Greater Bay Area. investors, offshore pension funds and asset
for growth 5
managers, potential issuers, infrastructure
This report has been prepared to help meet
owners and developers, as well as relevant • Snapshot: Macroeconomic outlook 6
the growing demand for green investment
government ministries. • Snapshot: Infrastructure spending 7
opportunities in the Greater Bay Area and
• Snapshot: Climate change risk and
to support the transition to a low carbon In developing this report, the Climate Bonds
mitigation measures in the GBA 8
economy on both regional and national levels. Initiative consulted with key Government
bodies, industry, the financial sector, peak Green finance trends and
It aims to facilitate greater engagement on this
bodies, NGOs and think tanks. We would like opportunities 9
topic between project owners, developers, and
to thank these partners along with the other
institutional investors. Green infrastructure • Global demand for green is growing 9
organisations that contributed to the report.
and corresponding green finance instruments • Green finance is growing in the China 9
are explored in the report, with sector-by- • Green finance is growing in the GBA 10
sector investment options presented. • Financing low-carbon transitions
in the GBA 11
Green infrastructure investment
opportunities 12
Green Infrastructure Investment Opportunities (GIIO)Report Series
• Low-carbon Transport 15
Green infrastructure presents a huge investment • Renewable Energy 17
opportunity globally, with an estimated Green Infrastructure • Sustainable water management 19
Investment Opportunities
USD100tn worth of climate compatible AUSTRALIA & NEW ZEALAND • Sustainable waste management 21
infrastructure required between now and 2030, • Green Buildings 23
in order to meet Paris Agreement emissions • New Infrastructure 25
reduction targets. However, there remains limited
Unlocking immense infrastructure
identifiable, investment-ready and bankable
investment opportunities in the GBA 27
projects, particularly in emerging markets. There
is also a lack of understanding of what types of Sponsors
Annexes 28
assets and projects qualify for green financing.
• Annex I:Selected Green Finance Policies
In response to this challenge, CBI is in the GBA 28
Green Infrastructure
developing a series of reports that aim to Investment Opportunities • Annex II: Green Finance incentives
VIETNAM
identify and demonstrate green infrastructure 2019 REPORT in the GBA 30
investment opportunities around the world. • Annex III: Green debt instruments 32
By so doing, it aims to raise awareness of what • Annex IV: Common green equity
is green and where to invest, as well as to instruments in Asia 34
promote green bond issuance as a tool to • Annex V: Green standards applicable
finance green infrastructure. in the GBA 35
Supported by European Climate Foundation
• Annex VI: Sample Green Pipeline 38
The report series commenced with the GIIO
• Annex VII: Climate Bonds Taxonomy 45
Indonesia report, launched in May 2018 and
now includes Australia & New Zealand, Brazil, Green Infrastructure Green Infrastructure
Endnotes 43
Investment Opportunities Investment Opportunities
Malaysia, Philippines and Vietnam reports. The AUSTRALIA 2019
INDONESIA
UPDATE REPORT
pipeline of GIIO reports being developed includes
further exploration of opportunities in Asia-
Pacific as well as opportunities in Latin America. Exchange Rate January 1, 2021
1 USD = 6.52 RMB
1 USD = 7.75 HKD
Sponsors Supported by European Climate Foundation
1 USD = 7.98 MOP
Climate Bonds Initiative
The Climate Bonds Initiative is an international is to help drive down the cost of capital for regulators; and administers a global green bond
investor-focused not-for-profit organisation large-scale climate and infrastructure projects standard and certification scheme. CBI screens
working to mobilise the USD100tn bond and to support governments seeking increased green finance instruments against its Climate
market for climate change solutions. access to capital markets to meet climate and Bonds Taxonomy to determine alignment and
greenhouse gas (GHG) emission reduction goals. uses sector specific criteria for certification.
It promotes investment in projects and assets
needed for a rapid transition to a low carbon CBI carries out market analysis, policy research, A simplified version of the Climate Bonds
and climate resilient economy. The mission market development; advises governments and Taxonomy is on the back cover.
The Guangdong-Hong Kong-Macao Greater Bay Area GIIO Report Climate Bonds Initiative 4Green infrastructure: an opportunity for growth
In the Guangdong-Hong Kong-Macao Greater part of the regional response to the climate pipeline could also help investors to understand
Bay Area (the GBA), the effects of climate change emergency. Delayed action in transitioning to that there is a sufficiently large pool of financially
and the risks associated with a greater than 2°C a low carbon economy increases the cost of attractive investments that are also green. In other
rise in global temperatures by the end of the change as well as the volatility and structural words, there are viable alternatives to non-green
century are significant due to its vast coastlines risks to the finance sector and underlying asset assets and projects, and investors can make their
and high exposure to natural disasters. Studies values. In this environment, major stakeholders preferences for green heard, which will in turn spur
also suggest the region faces the highest flood in banking, finance and superannuation have a the creation of a larger pool of green investments.
risks in the world.1 responsibility to act quickly.
There is often limited awareness and appreciation
Investment in low carbon solutions will be Globally, there is significant demand for green of what qualifies as ‘green investment’ beyond
essential for mitigating climate risk and meeting investments. Green debt instruments, including solar and wind energy. This knowledge gap
global emission reduction pathways under the green bonds and green loans — with proceeds has been holding governments back from
Paris Climate Change Agreement. The Outline used for climate-compatible and environmentally developing pipelines of commercially viable,
Development Plan for the Guangdong-Hong sustainable projects—provide useful tools for green infrastructure investment opportunities that
Kong-Macao Greater Bay Area (hereon referred to private investors looking to invest in green assets would otherwise play a vital role in supporting
as the GBA Outline Plan) issued by China’s State and projects. The first ever green bond from a the region’s transition to a low-carbon economy.
Council also emphasises green development and GBA entity was issued in 2016 by Link REIT, a real
Improving the general investment environment as
ecological conservation. estate investment trust in Hong Kong.
well as promoting more green finance will help to
Currently, much of the investment in infrastructure As of 31 December 2020, green bond issuance fund the infrastructure necessary to meet climate
in the GBA is being carried out through public from the GBA entities amounted to USD16.9bn targets. This means continuing to open up to
funding and PPP. However, public funding is not and the market is growing. investors looking for green and ensuring there is a
sufficient to meet the growing demand for green pipeline of bankable, investment ready projects.
In order to attract investors looking for green, there
infrastructure; new channels will be necessary to These measures will ensure that the GBA is on the
needs to be a visible pipeline of infrastructure
mobilise private capital. path to transitioning to a low-carbon economy
investment opportunities that align with
and becoming more resilient to the impact of
Adaptive and resilient infrastructure provision internationally accepted definitions of green.
climate change and other global shocks.
is also important, and it should become a core A large and visible GBA green infrastructure
Region Facts Zhaoqing
Area: 14,891.23km2
What is the Greater Bay Area?
The Greater Bay Area is an ambitious national
Population: 4.2m
Interest rate (cash rate): GDP: USD32.6bn
plan aimed at integrating the two Special
3.85% (China) (as of June 2021),2 Administrative Regions of Hong Kong and
0.86% (Hong Kong) (as of April 2021),3 Macao, together with the nine cities across
0.5% (Macao) (as of April 2021)4 the Pearl River Delta, namely Guangzhou,
Huizhou, Dongguan, Shenzhen, Jiangmen,
Inflation rate: Zhuhai, Zhongshan, Foshan, and Zhaoqing.
Foshan
1.3% (China) (as of May 2021),5 Area: 3,797.72km2
0.7% (Hong Kong) (as of April 2021),6 Guangzhou
Population: 8.2m
-0.64% (Macao) (as of April 2021)7 GDP:USD155.8bn
Area: 7,249.27km2
Huizhou
Population: 15.3m
Area: 11,347.39km2
Government 10Y, M: GDP: USD342.5bn
Population: 4.9m
3.17% (China) (as of June 2021),8 GDP: USD60.6bn
1.146% (Hong Kong) (as of June 2021),9
N/A (Macao)
Dongguan
Balance of trade: Area: 2,460.08km2
USD203.76bn (Pearl River Delta) (2019),10 Population: 8.5m
USD-3.23bn (HKD -25.228bn) Zhongshan GDP: USD137.5bn
(Hong Kong) (as of Jan 2021),11 Area: 1,783.67km2
USD-1.16bn (MOP -9.267bn) (Macao)
Population: 3.4m Shenzhen
(as of Jan 2021) 12 GDP: USD45bn Area: 1,997.47km2
Population: 13.4m
Government debt to GDP: Jiangmen
GDP: USD390.3bn
52.63%(China) (2019),13 Area: 9,506.92km2
0.27% (Hong Kong) (2019),14 Population: 4.6m
Hong Kong
N/A (Macao) GDP: USD45.6bn Macao
Area: 1,106.8km2
Area: 32.9km2
Population: 7.5m
Moody’s rating: Zhuhai Population: 0.67m
GDP: USD366.1bn
A1(China) (as of 09/14/2020),15 Area: 1,736.46km2 GDP: USD53.9bn
Aa3(Hong Kong) (as of 01/20/2020),16 Population: 2.0m
Aa3 (Macao) (stable)17 GDP: USD49.8bn
Source: Guangdong Statistical Yearbook 2020.
Note: Statistics are as of 2019.
The Guangdong-Hong Kong-Macao Greater Bay Area GIIO Report Climate Bonds Initiative 5Snapshot: GDP per capita in the GBA in 2019
Macroeconomic outlook
80
Green finance presents an opportunity in
improving macroeconomic conditions. 70
China staged an impressive recovery in 2020 – 60
exhibiting a 2.3% GDP growth, despite prolonged
50
lockdowns and a nationwide economic lull in Q1.18
40
As an economic powerhouse, GDP of the Guangdong
Province surpassed RMB11tn (USD1.7tn) in 2020 for 30
USD Thousand
the first time19 , ranking number 1 for 32 consecutive
20
years among all Chinese provinces in terms of
economic output. It reported a 6% increase in GDP 10
in 2020, just slightly lower than the 6.3% recorded
in 2019, the provincial economy remained intact 0
amid the COVID-19 pandemic.20
en
ai
an
an
n
a
en
ao
u
u
ng
ng
in
ha
ho
ho
uh
ac
gu
zh
gm
sh
Ko
qi
Ch
gs
gz
iz
Zh
ao
M
Fo
en
Guangdong has implemented effective
ng
Hu
an
on
ng
an
Zh
Sh
Do
Ji
Zh
Ho
Gu
measures to control the COVID-19 pandemic
Source: Wind.
resulting in a strong economic recovery since
the second half of 2020.21 The industrial structure of the GBA has reflected petrochemicals, smart home appliances, and
the extent of decentralisation and diversification. advanced materials.27
Hong Kong and Macao were less immune to
While the tertiary industry in Hong Kong,
the impact of the COVID-19 pandemic with both As the economy is put under pressure during
Guangzhou, Macao and Shenzhen has been
cities experiencing an economic downturn last the COVID-19 pandemic, infrastructure is
the main driving force for their economic
year. The Hong Kong economy contracted by necessary for a return to economic growth. And
development, the growth in the secondary
6.1% in 2020, the sharpest annual decline on green infrastructure is critical to achieving this.
industry in other regions of the GBA makes a
record22 while Macao’s GDP shrunk by almost Green infrastructure has positive environmental
greater contribution to the GDP.
50%,23 nearly destroying the economy.24 and economic benefits. It can create prosperity
The proportion of primary, secondary and by increasing competitiveness, productivity
According to the government, Hong Kong’s
tertiary industries in Guangdong Province and employment opportunities; extending the
economy is expected to grow by 3.5% to 5.5% in
stands at 4.3: 39.2: 56.5 in 2020. The added reach, reliability and efficiency of the national
2021 but with the high uncertainty associated with
value of advanced manufacturing and high-tech electricity grid, without creating air pollution;
the pandemic.25 Macao’s economy is expected
manufacturing accounted for 56.1% and 31.1% broadening the economic base; creating
to continue to struggle in 2021, as the global
of the above-scale industries, respectively, and new markets; and providing inclusion and
tourism and the local casino sector were hit hard
the added value of modern service industry connectivity across the GBA.
by COVID-19. Macao’s economy is not expected to
accounted for 64.7% of the service industry. The
return to its pre-pandemic size before 2022.26 Therefore, ensuring infrastructure is green
pace of industrial transformation and upgrading
would help to enhance the region’s resilience
Before the coronavirus outbreak, among the eleven has accelerated. At present, Guangdong Province
to future shocks and help to build a more
regions in the GBA, the GDP per capita of nine has formed seven trillion-level industrial
sustainable society.
regions exceeded the national average in 2019. clusters, including electronic information, green
The GBA Outline Plan One of the six basic principles of the plan is Hong Kong, as a leading global city for
‘to pursue green development and ecological finance, transportation and logistics, will
The GBA is a key strategic component of
conservation’. It also outlines seven areas of continue to strengthen its position as a global
China’s national development blueprint. It
development which include ‘taking forward offshore RMB business hub and international
aims to promote in-depth cooperation among
ecological conservation’ and ‘developing an asset management and risk management
nine cities in Guangdong Province and the
international innovation and technology hub’. centre. Other goals include promoting
Special Administrative Regions of Hong Kong
the development of high-end industries,
and Macao, with the aim of developing a As for the roles of the GBA cities, Guangzhou,
strengthening innovation and technology,
world-class city cluster by way of reforms, Shenzhen, Hong Kong and Macao are named as
nurturing emerging industries and increasing
innovation and opening up. the four ‘core cities’, with specific development
global competitiveness.
areas identified for each:
On 18 February, 2019, China’s central
Macao’s responsibilities as part of the GBA
government authorities issued the Outline Guangzhou will serve as an international business
include promoting business cooperation with
Development Plan for the Guangdong-Hong and trade centre and integrated transportation
Portuguese-speaking countries and promoting
Kong-Macao Greater Bay Area, marking the hub, as well as an important centre to cultivate
its example of a multicultural Chinese city.
official start of the implementation of the GBA science and technology education.
national strategy. The GBA Outline Plan not only The four core cities will drive Zhuhai, Foshan,
Shenzhen, as a special economic zone, a national
makes clear the role and position of each city, it Huizhou, Dongguan, Zhongshan, Jiangmen
economic core city and a national innovation city,
also sets mid-term and long-term development and Zhaoqing to best utilise the strengths
will accelerate its internationalisation and urban
targets, guiding the current and future of each city and foster coordination and
modernisation and continue its role as a major
development and cooperation of the GBA. development within the city group.
innovation hub for the region.
The Guangdong-Hong Kong-Macao Greater Bay Area GIIO Report Climate Bonds Initiative 6Investment by sector in Guangdong Province during the 14th FYP
Comprehensive transportation New Infrastructure
Rail transit 17.6% Road construction Major industrial fields 14.5% Information Inno- Ecological Agriculture
12.0% infrastruc- vation civilization rural field
construction 5.3%
ture 3.9% infra- 5.7%
structure
3.3%
Converged infrastructure 1.6%
Water supply New urbanization
guarantee and regional
People’s livelihood
1.9% integration
security 8.4% development 4.5%
Power Wind Power
Flood protection
projects power grid upgrading 1.8%
3.9% projects projects
Modern service
1.9% 1.8%
industry 4.0%
Port Channel Rural water
Airport 2.8% Network Smart water
Oil and gas projects 1.4% conservancy
1.2% 1.1% conservancy 0.1%
Integrated transportation hub
Modern energy Water
and integrated facilities 1.2% conservancy
Snapshot: Infrastructure Infrastructure investment in Guangdong Province
spending
120
Infrastructure pipelines have been
growing, with more opportunities Infrastructure
emerging for outside investment.
100 Production and supply of electric power, gas and water
Infrastructure planning and spending in the
Transport and postal services
GBA is ambitious. The GBA Outline Plan has a
strong emphasis on infrastructure, including Information transmission, internet and related services
80
transportation, information technology and
water infrastructure. It calls for closer integration Management of water conservancy, environment
in both physical infrastructure, such as bridges, and public facilities
highways and railways, and institutional 60
infrastructure, such as information systems.
In July 2020, the National Development and
40
Reform Commission (NDRC) approved the
Guangdong-Hong Kong-Macao Greater Bay Area
Intercity Railway Construction Plan. 13 intercity
20
RMB Billions
railways and five hub projects are planned, with
a total mileage of about 775 kilometres. The total
investment in recent construction projects is
about RMB474.1bn (USD72.7bn). 0
The major infrastructure projects in the 14th FYP
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
of Guangdong Province are expected to have
a total investment of RMB5tn (USD776.9bn), of Source: Guangdong Statistical Yearbook 2020.
which green infrastructure investment is not
less than RMB1.9tn (USD299bn), including rail New infrastructure has recently become a top Guangdong Province’s government estimates
transit, wind power, modern water conservancy, development priority for the GBA, and refers that at least RMB660bn (USD101.23bn) will be
ecological civilization construction and new to infrastructure that is ‘digital, smart, and invested during 2020–2022.31
infrastructure construction. innovative’. In October 2020, Guangdong Provincial
China Development Bank (CDB) formulated the
Government issued the ‘Three-Year Implementation
In Hong Kong, the Chief Executive’s 2020 Policy ‘Action Plan for China Development Bank to Support
Plan for Promoting the Construction of New
Address states that the government will spend the Construction of the Guangdong-Hong Kong-
Infrastructure in Guangdong Province (2020–2022)’,
HKD100bn (USD12.9bn) a year on infrastructure Macao Greater Bay Area (2019–2022)’, asserting
proposing to build high-quality 5G networks,
for the next five years.28 The Macao government that from 2019–2022, CDB will provide a total of
artificial intelligence, blockchain and other new
has initiated over 410 public construction RMB1tn (USD153bn) in financing to the GBA.32
technology infrastructure clusters, and promote
projects, each worth MOP100,000 (USD125,313)
ten smart projects such as smart energy, smart Before COVID-19, the infrastructure investment
or more in 2020, with a total value of MOP14.2bn
transportation, and smart cities.30 A preliminary in Guangdong Province had already seen a rapid
(USD1.7bn).29 The Macao Urban Development
pipeline of more than 700 projects with a total growth. The overall infrastructure investment
Master Plan (2020–2040) is under public
investment of over RMB1tn (USD153bn) is set up. growth rate in 2019 was 22.3%33 higher than in 2018.
consultation and will be issued in 2021.
The Guangdong-Hong Kong-Macao Greater Bay Area GIIO Report Climate Bonds Initiative 7Snapshot: According to climate-related studies, there are six of about RMB430m (USD65.95m), and the
Climate change risks and climate change trends in the GBA35: death of 16 people.36
mitigation measures in the GBA
• Summer high temperatures and heat waves Climate change and environmental degradation
Climate change has already had significant will intensify; are also sources of structural change that affect
adverse impacts on the GBA, including rising economic activities and, in turn, the financial
• Fewer rainy days but average rainfall intensity
temperatures and sea levels, increased rainfall system. There are two types of risks that climate
will increase;
and floods, and other extreme weather events. change poses to the economic and financial
• More extreme rainfall events; systems, namely physical risk and transition risk.
The GBA, surrounded by mountains on three
These risks may lead to economic consequences
sides and facing the sea to the south, has a • More extremely wet years but the risk of
including business disruptions, costs of improving
subtropical monsoon climate. The eleven GBA extremely dry years will remain;
resilience and adaptation, lower productivity and
cities are located at the confluence of three
• Global sea level rise will lead to coastal changes the shift to an economy with low-carbon emissions,
major rivers, Dongjiang, Xijiang and Beijiang
all over the world, including Hong Kong; which then in turn may cause financial fallout,
and the numerous canals that transverse them.
such as potential financial market and credit
They also sit in a floodplain that is only about • Threat of storm surges associated with tropical
losses, equity and bond price declines, carbon
2 meters above sea level which renders the cyclones will rise, and the intensity of landfall
asset write-downs and falling property values.37
GBA susceptible to regular diurnal tides as typhoons will increase.
the average peak tidal level is about 2.02 For the GBA, sectors including aviation,
Climate change has already brought serious
meters. Thus, the potential of fluvial, pluvial domestic transportation, real estate, agriculture
loss in the GBA. In 2019, various meteorological
and coastal flooding and landslides also render and finance are vulnerable to climate and
disasters caused a total direct economic loss
the GBA vulnerable.34 environmental-related risks.
China’s 2060 carbon ‘have CO2 emissions peak before 2030 and achieve In March 2021, the Chinese government
neutrality target and carbon neutrality before 2060.’ 38 This statement is released the 14th Five-Year Plan (FYP)
decarbonization pathway expected to provide additional impetus for Chinese (2021–2025), which sets a 18% reduction
government agencies, municipalities, and industry target for CO2 intensity and 13.5% reduction
Global climate change caused by the emission of
sectors to set up decarbonisation targets. target for energy intensity. As for climate
carbon dioxide and other greenhouse gases has
change, the 14th FYP outline reaffirms the
become one of the greatest challenges facing Shortly after making the Carbon Neutrality
implementation of the NDC for 2030 (without
mankind in this century. Under the framework of 2060 pledge, China’s President announced the
listing specific new targets). It also demands
the Paris Agreement, achieving carbon neutrality country’s further commitment at the Climate
that the nation to formulate an action plan
by the middle of this century is the fundamental Ambition Summit on 12 December 2020 that by
towards peaking CO2 emission before 2030 as
measure for the global response to climate 2030 China will:
soon as possible.40
change. In the Paris Agreement, China has
• lower its carbon dioxide emissions per unit of
committed to reducing its carbon intensity of To achieve Carbon Neutrality, the principal
GDP by over 65% from the 2005 level,
GDP by 60% - 65% from 2005 levels by 2030 emitting sectors will need to reduce their
and peak CO2 emissions by 2030 at the latest. • increase the share of non-fossil fuels in primary emissions by between 65% and 105% by
energy consumption to around 25%, 2050.41 And there are various studies about the
In a ground-breaking speech at the UN General
decarbonisation pathway based on different
Assembly in September 2020, Chinese President • increase the forest stock volume by 6bn m3
scenario and models. The general measures
Xi Jinping stated that the country will scale from the 2005 level, and
and investment needs for each sector are
up its Nationally Determined Contributions
• bring its total installed capacity of wind and
(NDCs) by adopting more vigorous policies According to Chinese Academy of
solar power to over 1.2bn kilowatts. 39
and measures, and the government aims to Environmental Planning’s estimate, there
will be RMB9.3tn (USD1.4tn) and RMB 11.5tn
Sector Key development areas (USD1.76tn) investment needed respectively
during the 14th FYP and 15th FYP periods
Power generation • Renewable energy
for 2030 carbon emission peak.42 China
• Energy storage
International Capital Corporation Limited
• Carbon capture and storage
(CICC) has estimated that China requires
Transportation • Electrification and hydrogen run rail and metro approximately RMB139tn (USD21.32tn) in
• Electricity vehicles for Individuals green investment by 2060 of which about
• Sustainable fuel for aviation and shipping RMB22tn (USD3.37tn) is needed up to 2030.
China’s every year green investment demand
Industry • Power generation/heat generation decarbonisation
accounts for about 2% of its total GDP.43
• Energy efficiency
• Technology innovation The massive investment demand for carbon
neutrality cannot solely rely on government
Buildings • Energy efficiency
funding. Therefore, the green financial system
• Heating decarbonisation
that aims to mobilise private capital to carry
Agriculture • Biogas project out green investments will play a key role in
• Waste management the process of achieving carbon neutrality.
• Afforestation and reforestation
The Guangdong-Hong Kong-Macao Greater Bay Area GIIO Report Climate Bonds Initiative 8Green finance trends and opportunities in the GBA
Global demand for green China’s quarterly green bond issuance (2016-2020)
is growing
Only aligned with Chinese definitions
There is a strong green finance momentum 25
globally and significant further growth potential.
Aligned with both Chinese and CBI green definitions
20
Green-labelled products have become globally
recognised as an effective means of directing 15
investment capital towards climate change
mitigation and climate change resilience and 10
USD Billions
adaptation projects, including green infrastructure.
The growing level of interest from investors in 5
green projects has resulted in the development
and growth of innovative financial products 0
including green, social, ESG and sustainability
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
bonds and loans; and green index products.
2016 2017 2018 2019 2020
Green bonds are currently the most developed Source: Climate Bonds Initiative
segment of thematic instruments, carrying greater
recognition from the investor base. Globally, the Green finance trend and policy Green bond policy is a key driver of this growth. In
volume of green bond and loan issuance has risen in China December 2015, the Green Bond Endorsed Project
sharply from USD171bn in 2018 to USD269.5bn in Catalogue was issued by the People’s Bank of China
Following the growth of green credit lending
2020, buoyed by strong interest from both investors (PBoC),44 which clarified the eligibility criteria for
fostered by the ground-breaking Green Credit
and issuers. Cumulative issuance of green bonds green projects, management of proceeds, and
Guidelines issued by the former China Banking
to date has now reached USD1tn, but there is reporting requirements. Green bonds issued by
Regulatory Commission (CBRC) in 2012, China’s
still a long way to go. To finance the goals of the financial entities are subject to this catalogue,
green bond market has seen the greatest amount
Paris Agreement, it is estimated that green bond and the green projects were classified into six
of policy and activities since ‘green finance’
issuance needs to reach USD1tn per annum by the themes: energy saving; pollution prevention and
took off in China in 2015. Supported by various
early 2020s. For emerging markets in particular, control; resource conservation and recycling;
directives, China’s green bond market grew from
there is a large gap between green infrastructure clean transportation; clean energy; and ecological
almost zero to the second largest in the world in
requirements and the size of green bond markets. protection and climate change adaption.
just a few years.
Timeline of China’s key green bond policies
2015 2017 2020
NDRC CSRC PBoC, NDRC, CSRC
Guidelines on Issuing Green Bonds Guiding Opinions of the China Securities Green Bond Endorsed Project
Kickstarted green bond market in China Regulatory Commission on Supporting Catalogue (2020 Edition)
the Development of Green Bonds (Consultation Version)
PBoC
Encouraged the issuance of corporate bonds Harmonized different standards of green
Notice of the People’s Bank of China
bonds, and promoted the integration of
on Green Financial Bonds (PBoC National Association of Financial Market
the domestic green bond market
Document No.39 [2015]) Institutional Investors
Kickstarted green bond market in China Guidelines on Green Note of Non-
Financial Enterprises
Green bond policy guidelines are available
2021
2016 for all bond markets in China
NAFMII
PBoC and CSRC
Seven Ministries including the Notice on Clarifying Relevant
Guidelines on the Evaluation and
Central Bank Mechanisms of Carbon Neutrality Bond
Certification of Green Bonds (Interim)47
Guidelines for Establishing Ensure that the funds raised by carbon
Regulated evaluation and Certification of
the Green Financial System neutrality bonds should only be used for
green bonds
Indicated the direction of further green projects
development of the green bond market
PBoC, NDRC, CSRC
Shanghai Stock Exchange Green Bond Endorsed Project
Notice on Launching the Pilot Shenzhen Stock Exchange Catalogue (2021 Edition)
Program of Green Corporate Bonds Notice on Launching the Pilot Program Excludes coal and other fossil fuels
Accelerated the development of the of Green Corporate Bonds Accelerated the from the list of eligible projects, and
corporate bonds45 development of the corporate bonds46 incorporates DNSH principle
The Guangdong-Hong Kong-Macao Greater Bay Area GIIO Report Climate Bonds Initiative 9On 21 April 2021, PBoC, NDRC, and China Timeline of key green finance policies in the GBA
Securities Regulatory Commission (CSRC)
jointly released the official version of the
Green Bond Endorsed Project Catalogue (2021
June, 2017 May, 2020
Edition). The joint release unifies the green Overall Plan for Building a Green Opinions on Financial Support for
bond guidelines in China which will become Finance Reform and Innovation the Guangdong-Hong Kong-Macao
the main rulebook to follow in the future. It also Pilot Zone in Guangzhou City, Greater Bay Area
excludes controversial categories such as ‘Clean Guangdong Province 26 measures were introduced to
Utilisation of Coal’ and ‘Clean Fuel’, narrowing The pilot zone will be the first to carry out further promote financial opening up,
the gap between China onshore green bonds- green finance reform and innovation pilot innovation, and deepen cooperation
related guidelines and the expectations from projects in Huadu District, Guangzhou
international investors. Compared with the 2020
Edition, it incorporates language around the
Do No Significant Harm (DNSH) principle and July, 2020
indicates the future possibilities of rolling out a
September, 2018
Implementation Plan for Providing
‘transition finance’ standard. Hong Kong Strategic Framework for
Effective Financial Support for the
Green Finance
Guangdong-Hong Kong-Macao
Green finance is growing Enhance ESG considerations
Greater Bay Area
in the GBA and promoting Hong Kong as an
Contains 80 detailed, supplementary
international green finance centre
The GBA Outline plan defines the goal of building measures that implement the financial
a green finance centre in the Greater Bay Area support to the GBA
and makes different plans for Hong Kong,
Guangzhou, Macao and Shenzhen.
January, 2019
Guiding Opinions on Building a Green November, 2020
Hong Kong Financial System in Shenzhen
Shenzhen Special Economic Zone
Green finance centre, and to set up an Measures to promote green finance
Green Finance Regulations
internationally recognised green bond in Shenzhen
China’s first law and regulation in the
certification institution.
field of green finance
Guangzhou
Pilot zone for green finance reform and July, 2019
innovation, and to study the establishment
Implementation Opinions on
of an innovative futures exchange
Promoting the Reform, Innovation
that takes carbon emission as its first
and Development of Green Finance
trading commodity.
in Guangzhou
Macao Specific plans and measures to promote
To develop special financial products the reform, innovation and development
and services such as leasing, explore of green finance in Guangzhou
Macao’s development taking account of
complementarity with nearby regions, and
study the feasibility of establishing in Macao
a securities market denominated and
cleared in RMB, a green finance platform There are multiple green finance policies issued bond issuers, grant up to HKD2.5m or
and a Sino-Lusophone countries financial in the GBA, to support the development of green HKD1.25m; and covering transaction-related
services platform. finance at the different levels, covering policy external review fees, capped at HKD800,000
framework design, regulatory policies, incentives per bond issuance/loan.
Shenzhen
and restraint mechanisms, etc. The detailed
Pilot zone for development in insurance • Shenzhen, a subsidy of up to RMB500,000 at
policies are listed in Annex I.
innovation, to further enhance the level 2% of the issuance scale
of connectivity between Hong Kong Local governments, including Hong Kong,
• Guangzhou, a subsidy of up to RMB1m at 10%
and Shenzhen markets and promote Shenzhen city, Guangzhou city, Guangzhou
of the issuance cost (on the exchange market
cooperation between Macao and Shenzhen Development District and Huadu District of
and the inter-bank market); a subsidy of up
with respect to special financial products, Guangzhou also issued their detailed rules and
to RMB1m at 20% of the issuance cost (on the
launch FinTech pilot projects, and boost the incentives for promoting green finance regarding
regional equity market);
development of FinTech carriers. green credit, green loan, green bonds and green
insurance (see Annex II). For instance, as for the • Huadou District: a subsidy of up to RMB1m at
Other Municipalities (e.g., Zhuhai)
issuance of green bonds, 1% of the bond issuance
To leverage their own strengths,
and develop financial products with • Hong Kong: covering bond issuance expenses • Guangzhou Development District:
distinct characteristics. (e.g. arrangement, legal, audit, listing fees, etc.) a 10% discount rate of the accumulated
for eligible first time green and sustainable interest payment
The Guangdong-Hong Kong-Macao Greater Bay Area GIIO Report Climate Bonds Initiative 10Growing appetite for green Internationally-aligned green bonds were on the rise before COVID-19
label in the GBA before the
7
COVID-19 pandemic
Internationally aligned green bonds from the 6 Macao
GBA-domiciled issuers between 2016 and 2020
amounted to USD16.9bn. Prior to the COVID-19 5 Hong Kong
pandemic, the GBA green bond market grew at
a CAGR of 69%, mainly driven by Hong Kong and 4 Guangdong
Guangdong-domiciled issuers. In 2019, PBoC
placed through its Macao Branch a green bond 3
worth USD963m, which marked the inaugural
issuance in Macao. 2
USD Billions
In response to the growing emphasis of the 1
GBA development plan from both state and
local levels, issuers such as Zhuhai Da Heng Qin 0
Investment, Agricultural Development Bank of
China (ADBC) and the Industrial and Commercial 2016 2017 2018 2019 2020
Source: Climate Bonds Initiative
Bank of China issued GBA-themed green bonds
in 2019, with proceeds dedicated to the green
development in the region. a low-carbon, climate-adapted, sustainable Buildings remain GBA’s dominant
Buildings was the dominant theme of GBA
model, but rather how to urgently finance and theme in 2020
operationalise the required transition.
green bonds in 2020, accounting for 41% of the
total volume, driven by the green buildings- As one of China’s economic powerhouses and a Unallocated 1% Land Use 1%
related issuance in Hong Kong. Transport (21%) leading manufacture hub, the GBA is an integral
and Energy (15%) were the next largest use of part of the country’s overarching national
Waste Energy
proceeds categories of GBA green bonds. strategy to reach its nationally determined
11% 14%
contribution (NDC) and has an instrumental role
Green asset backed securities (ABS) remains Water
to play in decarbonising its economy by pushing
a common issuer type for green bonds in 9%
ahead the low-carbon transition of hard-to-abate
Guangdong. Cumulative issuance has reached
sectors, i.e. the brown sectors.
USD2.4bn (or accounted for 38%) since 2016.
Securitisation – the process through which In the Financing Credible Transitions White
Transport
an issuer creates ABS backed by financial Paper published in September 2020 by Climate
20% Buildings
assets such as mortgages or lease receivables Bonds Initiative, we put forward a robust, flexible
44%
– enables companies and lenders to sell off and inclusive framework, which helps promote
existing financial assets to free up capacity for an economy-wide transition. The White Paper
more business. ABS are sold to investors who emphasises five key principles underpinning an
receive a return drawn from the cash flows of the ambitious transition:
underlying assets. Source: Climate Bonds Initiative
Over the last five years, the majority of the green
ABS in the GBA have been transport-related,
brought to the market by repeat issuers such as
5 principles for an ambitious transition
Guangzhou Metro and Shenzhen BYD Company
1. In line with 1.5 degree 4. Technological viability
Limited. Other green ABS deals were issued by
trajectory trumps economic
China Merchants Bank Co. Ltd., Shenzhen Energy
All goals and pathways competitiveness
Environmental Engineering Co. Ltd., China
need to align with zero Pathways must include an
Resources Leasing Co. Ltd., and Guangzhou
carbon by 2050 and nearly assessment of current and
Transportation Group.
halving emissions by 2030. expected technologies. Where
a viable technology exists,
Financing low-carbon even if relatively expensive, it
transitions in the GBA 2. Established by science
should be used to determine
All goals and pathways
Addressing climate change requires fundamental the decarbonisation pathway
must be led by scientific
and rapid transformations across all sectors for that economic activity.
experts and be harmonised
of the economy, including those with the
across countries. 5. Action not pledges
largest and hardest-to-abate emissions. Such
A credible transition is backed
transformations cannot be achieved through
3. Offsets don’t count by operating metrics rather
incremental improvements to established modes
Credible transition goals than a commitment/pledge
and systems alone. Climate action to date has
and pathways don’t to follow a transition pathway
been neither broad nor deep enough to be
count offsets, but should at some point in the future.
responsive to the scale of the challenge faced.
count upstream scope 3 In other words, this is NOT a
The question is no longer why or whether the
emissions. transition to a transition.
global economy needs to move swiftly towards
The Guangdong-Hong Kong-Macao Greater Bay Area GIIO Report Climate Bonds Initiative 11Green infrastructure investment opportunities
The GBA governments aim to develop billions of Methodology48 Climate Bonds Taxonomy and
dollars of new public works projects. Most major
The following section explores green
the Climate Bonds Standard
infrastructure projects in the GBA are listed on
infrastructure investment opportunities
and Certification Scheme
the central government’s official web portals or
across the GBA in six key sectors: low carbon The Climate Bonds Taxonomy features eight
are published by local governments.
transport, renewable energy, sustainable water climate-aligned sectors (see back cover).
There are already green infrastructure projects management, sustainable waste management, The purpose of the Taxonomy is to encourage
and assets of many different sizes and green buildings and new infrastructure. common broad ‘green’ definitions across global
technologies undertaken across the GBA These markets in a way that supports the growth of
There are various ways for an investor to gain
range from the USD12.8bn railway project a cohesive green bond market. The Climate
exposure to a specific project, asset or portfolio.
through to a USD2.8m distributed photovoltaic Bonds Standard & Certification Scheme is used
The possible investment pathways will vary
power generation project. A list of 70 projects to provide a labelling scheme for bonds and
depending on the asset ownership structure,
has been compiled into a sample pipeline other debt instruments. The Sector Criteria for
the stage in the asset’s financing lifecycle, and
(see Annex VI). the Climate Bonds Standard & Certification
the investor’s mandate. This can vary between
Scheme provide eligibility conditions or
This report uses the globally recognised projects with public and private funding.
thresholds which must be met for assets to be in
Climate Bonds Taxonomy and Sector Criteria to
Accordingly, we use the following metrics to line with a rapid trajectory toward a 2050 zero-
determine which projects and assets are green.
classify the green infrastructure investment carbon future. The criteria are developed based
There are also other existing green standards and
opportunities by project status: on climate science by technical expert groups
schemes adopted in China and internationally.
with input from industry.
Most of these apply to either the development • Completed projects: high profile, recently
and retrofitting of buildings, or a broad set of completed projects
infrastructure projects and assets (see Annex V
• Projects under construction: major projects
for more details).
that are under construction
Investors currently have insufficient tools to
• Planned projects: major projects that
ensure that their investments are making a
have not yet begun construction but have
positive impact. Having common definitions of
been announced and/or have undergone
‘green’ across global markets allows investors,
business case planning and/or have been
potential issuers and policy makers to identify
allocated budget.
green assets and attract investment more
conveniently and effectively. Case studies and a sample pipeline have been
developed for this report to show the different
Ideally, the GBA’s governments could adopt a
types of opportunities available in the short
best practice standard to identify green projects
and medium-term future in the GBA. The case
during infrastructure planning and collate these in
studies include both greenfield and brownfield
a single list. The GBA could then prioritise projects
projects and assets that could have been or
that are in line with international definitions of
could potentially be financed or refinanced via
‘green’ and provide clear ‘green’ labelling when
green bonds.
preparing future infrastructure pipelines.
Providing this level of visibility for green
infrastructure investment opportunities could
facilitate increased access to private sector
capital for the GBA’s economic development,
the acceleration of the GBA’s transition to a
low carbon economy and help to meet global
institutional investor demand for green assets.
The Guangdong-Hong Kong-Macao Greater Bay Area GIIO Report Climate Bonds Initiative 12What’s green?
+ –
+ –
+ –
Geothermal: Solar: Hydropower:
According to the The world installed a record Hydropower is the largest
Geothermal Energy number of new solar power source of renewable
Association, 39 countries could projects in 2017, more than electricity in the world,
supply 100% of their electricity needs from net additions of coal, gas and nuclear plants producing around 17% of the world’s
geothermal energy, yet only 6% to 7% of put together.51 electricity from over 1,200 GW of installed
the world’s potential geothermal power has capacity, and is expected to remain the
UNFCCC
been tapped.49 world’s largest source of renewable
electricity generation by 2022.50
Drawdown Agenda
International Energy Agency
The Guangdong-Hong Kong-Macao Greater Bay Area GIIO Report Climate Bonds Initiative 13© Climate Bonds initiative
Transport (rail): Water: Buildings:
75% of the world’s countries The UN says the planet is Building-related emissions
have established strategies facing a 40% shortfall in account for about one-third
and targets to improve the water supply by 2030, unless of global GHG emissions and
environmental performance of their transport the world dramatically improves the could double by 2050, making building
sector within their Intended Nationally management of this precious resource.53 efficiency a critical part of the COP21
Determined Contributions (INDCs). One-fifth agenda.54
UNFCCC
of the transport-related (I)NDCs include
GreenBiz
measures in the railway sector.52
UNFCCC
The Guangdong-Hong Kong-Macao Greater Bay Area GIIO Report Climate Bonds Initiative 14You can also read
