Paul Chan Highlights Hong Kong's Investment Opportunities at 2024 APIC Pension and Sovereign Funds Summit

Speech by FS at 2024 APIC World Pension, Social Security and Sovereign Wealth Funds Summit

Following is the speech by the Financial Secretary, Mr Paul Chan, at the 2024 Asia Pacific Investors Cooperation (APIC) World Pension, Social Security and Sovereign Wealth Funds Summit today (November 13):

Ana (Founder and Chief Executive Officer of APIC, Ms Ana Sharp), Ka-shi (Chairman of the Hong Kong Trustees' Association, Ms Lau Ka-shi), Alpha (Director-General of Investment Promotion at Invest Hong Kong, Ms Alpha Lau), distinguished guests, ladies and gentlemen,

​Good morning. It is a pleasure to be here at the beautiful Hong Kong Yacht Club to join you all for the 2024 APIC World Pension, Social Security and Sovereign Wealth Funds Summit. Delighted to welcome asset owners, public and private fund managers, institutional investors, and key experts in this field from around the world to gather in Hong Kong.

Pension, social security, and sovereign wealth funds are critical components of the global financial ecosystem. Collectively, these funds manage trillions of dollars in assets, making them one of the largest sources of investment capital worldwide. They are not only investors, but also as key players in shaping market trends and driving economic growth.

Changing landscape of investment

Allow me to share a couple of observations on the changing investment landscape across the globe.

The first is the focus on sustainability. At a time when policymakers worldwide increasingly incorporate ESG (environmental, social, and governance) and net-zero commitments into their policy framework, many public funds are seeking to support and drive sustainable development goals, both at home and abroad, such as investing in clean energy, green infrastructure, and affordable housing.

The second observation is about asset allocation. While public funds normally seek more long-term returns, in the public market, alternative investments are increasingly used as a diversification means to mitigate market volatility risks, with potentially more attractive risk-adjusted returns. As countries seek to support economic development through investing in infrastructure, innovation and technology, or projects of national priorities, more opportunities for alternative investment become available.

The third observation is about shifting economic gravity and the impact of geopolitics. In recent years, emerging markets such as ASEAN (Association of Southeast Asian Nations) countries have become more popular investment destinations, given their rapid economic growth, young population, expanding middle class, and thus potential for higher returns. Meanwhile, at a time of continuing conflicts and geo-economic fragmentation, some funds from the US (United States) or even Europe have been forced to reduce their investment holdings in certain markets; meanwhile, some countries, like those in the Middle East, are diversifying their investments from the traditional US and European markets to other regions, such as Asia. The process is dynamic, complicated and ever changing.

Hong Kong's value proposition

​In face of this rapidly changing global investment landscape, I would submit that Hong Kong is where you should allocate your assets.

In terms of international strengths, Hong Kong enjoys the unique advantages under the "one country, two systems" arrangement. Here is where you could have convenient, and at times, priority access to the vast investment opportunities of China while enjoying all the advantages of a world-class international financial centre.

That means the free flow of capital, goods, people, and talent; the common law and a judiciary that exercises powers independently; a currency pegged to the US dollar; a simple and low tax regime; and regulatory regimes and business practices that align with the best international practices. In other words, a familiar environment to do business and invest.

​"One country, two systems", let me add, will be here in Hong Kong for the long run. It is a solemn commitment of President Xi Jinping and the country.

Every now and then, we hear misconceptions about Hong Kong. For instance, there were reports about the outflow of funds from Hong Kong.

But the facts speak for themselves. Over the years, we have weathered many ups and downs and even crises in the financial market. And we built stronger buffers. Hong Kong's banking system, for example, has a liquidity ratio of over 180 per cent, well above the international requirement of 100 per cent; capital adequacy ratio at 21 per cent, much higher than the 8 per cent requirement. As a matter of fact, bank deposits in the city have risen by over 13 per cent, or US$250 billion, since the beginning of 2022 and until September this year.

​Despite market volatility from time to time, we see global investors gradually restoring confidence in our stock market. In particular, in the stock market rally in late September after the Central Authorities announced a package of stimulus measures, we have seen strong buying interest from American and European investors. They together constituted some 85 per cent of the buy side by value. In terms of investor categories, 90 per cent of them are long-term fund managers and investment banks.

Turning to asset and wealth management, Hong Kong is managing over US$4 trillion of assets, with over half of them sourced from outside Hong Kong and the Mainland. That figure represents some 30 per cent increase from that in 2018. Many asset and wealth management firms are expanding their operations in this city.

Investing in the future of Hong Kong

Looking ahead, the prospects of Hong Kong remain promising, as we continue to invest in the future of this city with the staunch support of the Central Authorities. And that will present valuable and rewarding investment opportunities for investors from all over the world. Let me highlight a few areas.

First, our commitment to sustainability. Hong Kong fully embraces the Paris Agreement and has developed clear action plans to achieve carbon neutrality. But our vision goes beyond this. It is our aspiration to become an international green tech and green finance centre that supports regional and global green transition. For this, we have already laid a solid foundation. As Asia’s leading green finance hub, we have on average issued over US$63 billion in green debts annually over the past three years. That accounts for more than one-third of the total amount of green bonds issued in Asia. For green tech, we are home to over 200 green tech firms that offer a wide range of innovative solutions. Many of them have already expanded their operations in overseas markets.

Our vision extends to cover sustainable infrastructure. Locally, we are fast tracking a number of large-scale infrastructure projects, including the Northern Metropolis, which will be pivotal to Hong Kong's innovation and technology future. At the same time, we are also committed to supporting sustainable infrastructure projects in other countries, through innovative financing arrangements. For instance, over the past two years, Hong Kong arranged two batches of securitised infrastructure loans amounting to US$800 million. They support more than 50 projects in the Global South. But more than that, we also offer our expertise in the planning, construction, operation, and management of infrastructure projects. Many of our operators, like the Airport Authority and MTRC (MTR Corporation Limited), have been working with their global partners in running projects overseas.

Then, there is the Guangdong-Hong Kong-Macao Greater Bay Area (GBA). The GBA, comprising Hong Kong, Macao, and nine Mainland cities in Guangdong Province, is an affluent region with a population of 87 million, and a GDP (Gross Domestic Product) of around US$2 trillion. It is an economic powerhouse of China, home to many tech giants. With the support of the Central Authorities, Hong Kong is enhancing our synergetic collaboration with the GBA, particularly on the tech front. This vision is to turn the GBA into a region led by finance and innovation, one that combines the strengths of the San Francisco Bay Area and the New York Bay Area.

The third area to highlight is our comprehensive strategy to diversify Hong Kong's economy and raise our competitiveness. Innovation and technology is our handle, and we will focus on four strategic areas, namely, AI (artificial intelligence) and big data analytics, biotech, fintech, as well as new materials and new energy. To expedite development of these sectors, we set up the Office for Attracting Strategic Enterprises towards the end of 2022, proactively reaching out to enterprises from the relevant fields. Together with the efforts of other government departments, we have successfully attracted over 100 innovative enterprises to Hong Kong, which together will bring us more than US$6 billion in investments and create 17 000 jobs.

Going hand in hand with our quest for strategic enterprises is our stepped-up effort in attracting talent from all over the world. Our various talent admission schemes have been highly popular. Nearly 400 000 applications have been received so far. We have approved more than 250 000 of them, with more than 160 000 people having already arrived in the city.

And a discussion on investing in Hong Kong's future would not be complete without mentioning the Hong Kong Investment Corporation Limited, or HKIC. As "patient capital", the HKIC has been performing the role of channelling private capital and market resources into the above-mentioned strategic industries. Unlike many other sovereign funds, the HKIC has a dual mandate of seeking a reasonable financial return, and more importantly, of enhancing Hong Kong's competitiveness and economic vitality in the long term through strategic investment. Projects concluded by the HKIC include, among others, one using AI for drug discovery process, and another one exporting top-notch EV (electric vehicle) charging solutions to Thailand. We welcome more collaboration with the private market as we drive investments in innovation and technology that would not only generate financial returns but also create tangible benefits for the community and humanity.

And speaking of the HKIC, I am glad to report that it will also be hosting a Roundtable for International Sovereign Wealth Funds in January next year where participants could gather to share insights, and explore investment opportunities and develop partnerships. You are more than welcome to join.

​Ladies and gentlemen, I hope I have given you some good account about the investment opportunities that Hong Kong offers, and the rewarding returns that could be reaped – not only financially but also socially. I would now be happy to take your questions.

Speech by FS at 2024 APIC World Pension, Social Security and Sovereign Wealth Funds Summit Source: HKSAR Government Press Releases

Speech by FS at 2024 APIC World Pension, Social Security and Sovereign Wealth Funds Summit Source: HKSAR Government Press Releases

Opening speech by SEE at COP29 China Pavilion's Side Event

Following is the opening speech by the Secretary for Environment and Ecology, Mr Tse Chin-wan, at the China Pavilion's Side Event: "Climate Action: From Climate Science to Opportunities to Develop New Energy" of the 29th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP29) in Azerbaijan, today (November 13, Azerbaijan time):

Dr Chao Qingchen (Director-General of National Climate Centre, China Meteorological Administration), Director Wang Yi (Vice-chair of China's National Expert Panel on Climate Change), distinguished guests, ladies and gentlemen,

Good afternoon. With the support of the Ministry of Ecology and Environment, and the presence of leaders, professionals and experts in climate science and new energy, I am very privileged to be here at the China Pavilion of COP29 in Baku, and see so many friends here. Professor Saulo, Secretary General of the World Meteorological Organization (WMO) will join us later to share the work of WMO.

On fighting against climate change, I think we all know that China has pledged to achieve carbon peak before 2030 and carbon neutrality before 2060. For Hong Kong, to reduce carbon, we stopped the building of coal-fired power plants in 1997 and have been gradually shifting to natural gas and nuclear power. As a result Hong Kong reached carbon peak in 2014. Therefore we set an interim target to cut the emission by half before 2035 and achieve carbon neutrality before 2050.

Last year I told you that Hong Kong's per capita emission was about 4.5 tonnes in 2022. I am delighted to report that our emissions in 2023 was about 4.4 tonnes. Comparing to 2014, the reduction has been almost 30 per cent. As a reference, the 2023 United States’ carbon emission was 13.8 tonnes per capita. European Union in 2022 was 7.25 tonnes per capita. Therefore, Hong Kong is not doing very bad in this aspect.

To further reduce carbon, Hong Kong's Climate Action Plan 2050 has a four-pronged strategy. To achieve net-zero electricity generation, to promote green buildings and energy efficiency, to promote green transport and to find a better way to manage our waste.

You may wonder why waste is an issue relevant to carbon emissions. It is because in Hong Kong, we still use landfill for disposal of our waste. When the garbage is buried in landfills, they will decay and emit methane, which is a very strong greenhouse gas. Hence, Hong Kong needs to find a better way to manage our waste.

Under our strategy, there are 3 important targets. Today, coal still shares less than 20 per cent of the power generation in Hong Kong. Hence, the first is to stop using coal for power generation before 2035.The second target is to promote green transport, we will stop the registration of new fossil-fuel powered private cars before 2035, including hybrid. You may ask, how well Hong Kong is doing on that? In the first half of this year, out of 10 new private cars in Hong Kong, six or seven are electric. Therefore, I think the take-up rate is among the better in the world. The third target is to deal with methane from landfills. We are working to stop using landfills before 2035. For that purpose, the first waste-to-energy incinerator will come into operation next year and we will tender out in December to build the second waste-to-energy incinerator which will handle 6,000 tonnes of waste per day.

At the moment, about 25 per cent of the electricity in Hong Kong is nuclear power from the Mainland. To cut our carbon emissions by half before 2035, we need to further increase the share of net-zero carbon electricity supply, from the current 25 per cent to 60 to 70 per cent, by 2035. For that purpose, the current cross-border electricity transmission infrastructure is being enhanced and new infrastructure is under planning for completion also by 2035. 2035 is a magic and very important year for Hong Kong.

Hong Kong is also getting prepared for new energy solutions such as hydrogen. We have formulated the Strategy of Hydrogen Development in Hong Kong in June this year to capitalise on the environmental and economic opportunities from the global development of hydrogen energy. Our Commissioner for Climate Change, Mr Wong Chuen-fai, will introduce to you later about our vision and strategy on hydrogen development.

In the past 2 years, Hong Kong experienced two super typhoons, record breaking rainstorms, serious floodings, and this year we have the hottest ever Mid-Autumn festival in Hong Kong. It was 35.7 degree Celsius!

On adaptation, the Government has set up a working group led by the Civil Engineering and Development Department to look at our critical infrastructure, where they are, what they are as well as their design standards, and develop engineering standards and infrastructure plans to ensure that the infrastructure can stand for the extreme weather brought about by climate change. The vice president of the Hong Kong Institution of Engineers, Ir Frank Chan, will share with us the innovation in developing climate-resilient infrastructure in Hong Kong.

My dear friends, whether or not the world can achieve carbon neutrality before 2050, I can assure you that the climate will continue to change for decades. It is just the beginning. Therefore we also need to get prepared to deal with disastrous situations. In Hong Kong, our Chief Secretary leads a working group supported by all bureaux and departments to, in case necessary, rescue people and to help the city recover quickly from damages.

Our Hong Kong Observatory working with the Drainage Services Department, has developed a model using big data and artificial intelligence, trying to predict flooding risks a few hours before they actually happen, so that we can mobilise manpower to get prepared. That model is being tested. The Assistant Director (Development, Research and Administration) of the Hong Kong Observatory, Ms Sandy Song, will share with you more information on building of climate resilience through climate and weather services in Hong Kong.

While Hong Kong is working hard to fight against climate risks, some people may ask about how Hong Kong can contribute to other parts of the world in combating climate change. Hong Kong is a regional hub, a gateway from China to other parts of the world.

Mainland China, our motherland, has many innovative products and many new technologies that can help greening the future, reducing carbon emissions, which can help building infrastructures and cities in a green, low carbon, and safe manner. Hong Kong can be a gateway for introducing these green technologies and products to other parts of the world.

Looking further, to achieve the carbon neutrality goal, all sectors of society will need money to invest in decarbonisation technologies, research and development, capacity building, infrastructure, etc.

Being an international financial centre, Hong Kong is rising as an international green finance centre. The total green and sustainable debt issued in Hong Kong exceeded US$50 billion in 2023. Among this, the volume of green and sustainable bonds arranged in Hong Kong topped the Asian market in 2023, accounting for 37 per cent of the total.

We have, under the Government Sustainable Bond Programme, successfully issued since May 2019 Government green bonds totalling US$25 billion (HK$195 billion) equivalent, including green bonds denominated in Renminbi, USD, and Euro, retail green bonds, as well as a tokenised green bond.

To facilitate green finance flows, the Hong Kong Taxonomy for Sustainable Finance was published in May this year to provide a classification system that allows investors to identify and invest in activities that are making a positive impact on the environment. It aligns with the mainstream taxonomies of the Mainland and the European Union, and will be expanded to cover more sectors and activities.

We are also an international carbon market connecting opportunities across the Mainland, Asia, and the rest of the world. Core Climate has been launched to offer HKD and RMB settlement for the trading of international voluntary carbon credits. Looking ahead, it will continue to promote synergy with its Mainland counterparts to build a dynamic regional marketplace.

Accurate information is essential to green and sustainable financial services. The Government and financial regulators therefore aim for Hong Kong to be among the first jurisdictions, to align the local sustainability disclosure requirements with the ISSB Standards. This will help showcasing to international investors and markets Hong Kong’s commitment to reinforcing our leading position on the international sustainable finance map.

Ladies and gentlemen, climate change affects every corner of the earth. It is a challenge to combat climate change, but the green transition brings also new opportunities to all sectors of the community. I look forward to embarking on this green transition journey with all of you here today as we strive for carbon neutrality and a sustainable future for the world. Thank you.