Financial incentives and sustainability linked loans could be attached to data gathered from the use of climate technology, a banker and economist who leads environmental, social and governance solutions at HSBC told a discussion Wednesday at Hong Kong Fintech Week 2021, the flagship event for the industry.
Jonathan Drew, managing director of ESG solutions, global banking at HSBC, suggested how sensors could be used to collect data related to the natural environment.
Such data would be credible, he told the panel discussion on green tech in the morning session.
“A certain species, or a natural habitat could be monitored. If we can capture reliable data, we can then show the benefits of the action that’s perhaps caused the improvement.”
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If, for example, the avoidance of algal blooms resulting from agriculture fertilizer runoff could be measured, then the benefit of an alternative agricultural technique could be justified, calculated and monetized, Drew said.
Drew also noted the commitments made at Cop26, the UN Climate Change Conference in Glasgow, Scotland to reduce methane emissions, and said they are principally about, “fugitive methane from the energy systems as well as the agricultural systems”.
The importance of data from climate tech is that it is “very likely to be trusted”, said Jonathan Drew, managing director of ESG solutions, global banking at HSBC. Financial incentives and financial payments could be attached to such data, he added
Methane emissions could be calculated from data captured by a satellite, he said.
US Climate Envoy John Kerry told the summit Tuesday that 100-plus countries are committing to reduce methane emissions by 30 percent by 2030.
Drew said: “You can see, not optically, the impact of the methane by the energy absorbed, the change in the energy spectrum, all tracked by satellite. Collect the data, process it, put it into the image that we can interpret, and you can see how regulators can use that to put financial penalties, or the financial systems can use that as data, and there’s another opportunity to put that into products such as sustainability-linked loans, so that the financial system will then incentivize that improved performance.”
The importance of data from climate tech is that it is “very likely to be trusted”, Drew said.
Financial incentives and financial payments could be attached to such data, he added.
This will create a “whole new potential set of capital flows to drive and deliver sustainable performance,” Drew said.
In May, HSBC Asset Management named a new climate technology team to widen direct investment capabilities in alternatives. The asset managers will develop a venture capital investment strategy providing clients with opportunities to invest globally in technology startups that are addressing the challenges of climate change.
Among milestone sustainable finance transactions by HSBC were Commercial Bank of China’s $3.15 billion Greater Bay Area green bond in 2019, and Hong Kong’s inaugural sovereign $1 billion green bond.
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Also, Link REIT issued the first green bond in Hong Kong in 2016, a $500m deal.
In the Policy Address last month, the Chief Executive Carrie Lam Cheng Yuet-ngor announced initiatives to develop and strengthen the Hong Kong Special Administrative Region as a green and sustainable regional finance center.
Green finance came on the policy agenda in 2017. In 2018, Hong Kong also launched several policies to encourage green financing.