We incorporate ESG factors into our investment analysis, and seek to grow our sustainable investments that embrace climate transition, mitigate ESG risks and enhance portfolio returns. We select and appoint external managers that share our RI beliefs and align in such a way that the overall sustainable long-term economic performance is attainable.

Our Implementation

For public market investments,

  • included ESG factors in the selection, appointment and monitoring of our external managers
  • incorporated ESG metrics in our credit risk model for bond portfolios
  • continued to expand green and sustainable investments:
    • ESG-themed passive equity mandates managed by external managers using ESG equities index as benchmark
    • decarbonisaton overlay strategy for passive equity mandates managed by external managers
    • green, social and sustainability bonds since 2015
    • a green bond fund managed by an international organisation
    • the Managed Co-Lending Portfolio Programme (MCPP) run by the International Finance Corporation on sustainable projects in emerging markets and MCPP One Planet focusing on climate-smart investments aligned with the Paris Agreement in emerging markets.

For private market investments,

  • examined ESG policies and practices of general partners. ESG evaluation is conducted as a mandatory part of due diligence of all Long-Term Growth Portfolio investments.
  • continued to invest in projects with sustainable features:
    • direct/co-investments in renewable energy assets since 2013
    • private equity funds that focus on energy transition and global decarbonisation
    • buildings and warehouses with green and sustainable features. Green accreditation is a predominant factor for real estate investments.

Case Studies
Expand All
Collapse All
  • Infrastructure project embracing nature conservation

    The HKMA has an investment in a pan-African wind farm operator, which accords high priority to social and biodiversity considerations, in addition to producing clean energy. Prior to the arrival of wind farms, local villagers used toxic food traps to deter predators from harming their livestock, but this had inadvertently killed off certain endangered species of vultures.

    To help local villagers protect their livestock, which represent a significant portion of their wealth, the investee company builds livestock shelters as an extension of the wind farm installation, protecting livestock from falling prey to natural predators. Further, the wind farm operator engages an on-site bird monitoring team to warn of any appearance of vultures attracted by the occasional carcasses left over by predators, such that the wind turbines can be shut down to avoid striking the vultures.

    The minimisation of livestock being killed by predators creates a win-win situation: preserving the villagers’ livelihood, and at the same time reducing vulture deaths caused by the wind turbines, which in turn preserves an endangered species.

  • ESG improvements throughout the supply chain

    Good ESG practices can expand revenue sources of corporations by creating more business opportunities as illustrated by this example involving a supply chain operation. An investee company, which is a Mainland integrated logistics warehouse operator dedicated to cold chain, medical, chemical and high-end consumer sectors, faces increasing demand for higher ESG operational standards. The growing ESG requirements emanate mainly from calls by multinational corporations (MNC) for their service providers to meet higher decarbonisation targets in line with the Paris Agreement. In response, the company has engaged an external ESG consultant to help devise a three-year ESG plan to reduce its carbon emissions intensity by 50% by 2030.

    The comprehensive decarbonisation plan led to major achievements, which in 2021 alone included:

    These ESG initiatives have earned the company a “Low Carbon and Green Management Case Award” from the China Federation of Logistics and Procurement. Given the achievements and recognition, the investee company is able to win new business opportunities from many consumer and chemical MNCs that accord priority to ESG practices.

  • Deploying innovative technology to produce clean hydrogen and carbon black

    The HKMA has invested in a company involved in the production of clean hydrogen and carbon black (i.e. a carbon extract in powder form). Hydrogen is a common gas and can be used widely to produce ammonia for fertilisers, while carbon black is a reinforcing agent used in various goods such as automobile tires, inks, plastics and other rubber products.

    The conventional production process for the production of hydrogen and carbon black releases large amounts of greenhouse gas into the atmosphere. The company has deployed an advanced methane pyrolysis technology to split natural gas into hydrogen and solid carbon, powered by electricity from renewable energy sources. This technique produces green hydrogen and carbon black with a much lower level of carbon emissions discharged than the prevailing conventional production process.

    Using this new methane pyrolysis technology, it was estimated that carbon emissions could be reduced by 97% for the same amount of hydrogen and carbon black produced, and other harmful contaminants could also be reduced. In addition, this new production technology entails a lower cost and a higher production yield than other existing methods of producing both hydrogen and carbon black.

  • Environmentally friendly pest control solutions

    The HKMA has invested in a pest control company which adopts environmentally friendly solutions. While traditional pesticides and chemicals can exterminate pests effectively, dead pests have adverse implications for public hygiene if not promptly or properly disposed of, and environmental concerns can also arise from the seepage and disposal of chemical ingredients.

    The company’s biocide-free solution is to deploy physical pest traps, thereby avoiding the use of harmful chemicals. The company also uses internet-linked motion sensors to remotely detect whether pests have been trapped. With this new technology, the company can optimise route planning to collect trapped pests and reduce the mileage travelled, thereby lowering carbon emissions.

    The net effect on carbon as measured on a company-wide basis has shown an encouragingly low reading of 0.36 kg/CO2e/$ net sales, which is close to the industry average for low-carbon-emitting sectors such as legal services and software publishing.

  • First-ever warehouse verified as net zero carbon construction

    While the construction industry is a major contributor to carbon emissions, one of the warehouse developers in our investment portfolio, adopts a net zero carbon process in its overall construction and operation of warehouses.

    Standards and metrics for measuring the baseline of net zero carbon are in place, and construction planning takes into consideration the sustainability of materials and components used. The resulting warehouse is carbon-efficient and designed with sustainable features, including solar thermal systems, electric vehicle charging portals, natural lighting and rainwater harvesting. The carbon footprint of the warehouse construction has net 25.8% lower carbon emissions than a standard logistics building, according to measurements by an independent consultant.

    To further offset carbon emissions from the construction work, 32,799 net trees were planted during the process. Post-construction, the warehouse reduced carbon emissions by 26.9% in its daily operations compared with a standard warehouse.

Last revision date : 13 June 2023