At the end of February, Hong Kong released its next fiscal year budget plan, including a HK$100 billion ($12.8 billion) upper limit for issuance of new green bonds. It has been reported as the single highest-value commitment to sovereign green bonds to date.

So, what does this mean for progress toward the funding of a climate-smart global economy?

  1. Alignment — First of all, the size of the commitment means the city state is moving toward aligning all new bond issues with climate-smart goals.
  2. Market shift — It also means Hong Kong’s vast financial sector could be getting ready to shift toward assets worldwide that incentivize climate-smart practices.
  3. Decarbonization — Given Hong Kong’s extreme population density, it also means these new funds will be more likely than others issued elsewhere to not only foster new projects but to actively decarbonize existing infrastructure.
  4. Life cycle — We can also expect to learn a lot about how long these assets remain in circulation, and what role they play in catalyzing wider pools of finance.

Through the Resilience Intel collaboration, we are building a system to track, grade, and roadmap the upgrading of financial climate intelligence across the whole economy. Sovereign green bonds give us vital information for understanding how macro-critical investment dynamics will operate in a particular economy. In short, trends will go toward reducing environmental harm, rewarding efficiency and sustainability, and low-carbon innovation.

In the case of Hong Kong’s new bond issue, we will be looking to share information with ratings agencies, municipal authorities, and end-users — those who directly benefit from the new construction, innovation, and enterprise funded in whole or in part by these bonds.

As part of the Talanoa Dialogue process, which will feed verified stakeholders’ inputs into the UN climate negotiations this year, Resilience Intel has put forward a section of the Talanoa Dialogue Engagement Toolkit. The meeting format and submission guidelines will facilitate deep-rooted, innovative, inclusive thinking about 2, 5, 10, and 20-year time horizons.

The key questions for a major new green bond issue like this are:

  • Future — What kind of world do we want to live in 20 years from now (2038)?
  • Action — Can we identify the transformational action steps that make that future world more probable?
  • Ambition — How ambitious do we have to be starting right now to achieve those action steps efficiently and aim past them?
  • Market — What kinds of parallel investment can climate-smart financial instruments catalyze in the wider economy?

And finally, we have to ask, what happens to macro-critical drivers of all kinds, which interact with value creation across the economy?

  • Does infrastructure become not only cleaner and greener, but also more conducive to local entrepreneurial action and reward?
  • Do standards for air and water quality translate into a faster pace of technological innovation?
  • Does public health benefit from climate-smart investment, allowing for day to life in communities to become an engine both for quality of life and for personal and civic empowerment?
  • Do all of these translate into greater transparency, more forward-thinking public planning, and resilient everyday economic value?

For Hong Kong, climate-smart investment will have to go toward coastal resilience, infrastructure, and energy. But climate-smart investment is increasingly showing itself to be a multisolving strategy for action on all 17 Sustainable Development Goals, and a critical pathway to enhancement of locally rooted / Main Street / community-level macroeconomic vibrancy.

The US$12.8 billion Hong Kong green bond issue sends one signal more clearly than any other: the autonomous territory is banking on a climate-smart future. That means ramping up generalized investment toward all of the above action steps and benefits.

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