Governments around the world are putting policies in place to curb carbon emissions. Hong Kong is no different. It continues to make strides to protect its world-class status through its sustainable development.
In early 2017, the Hong Kong government released its Climate Action Plan 2030+ report, which set out Hong Kong’s carbon emissions reduction target for 2030. As buildings account for about 90% of electricity consumption in Hong Kong, there is great potential to achieve the government’s ambitions through direct measures in the built environment, such as energy efficiency improvements and the use of renewable energy.
As part of the Climate Action Plan, Hong Kong launched its feed-in tariff (FiT) scheme late last year, an incentive program encouraging the use of renewable energy resources. Under the scheme, any non-governmental bodies or individuals who install solar and wind energy systems will not only make a positive impact on the environment, they can also make a profit.
Through the FiT scheme, buildings with grid-connected renewable energy systems can sell Renewable Energy Certificates, similar to carbon credits, to Hong Kong’s power companies. HK Electric and China Light and Power (CLP) will then buy renewable energy and sell it to individuals and businesses wanting to lower their carbon emissions. Tenants can benefit from the cost-efficient energy source while demonstrating their commitment to corporate social responsibility.
While it is too early to evaluate the scheme now, there are some initial figures to show the response has been positive. Two months after implementation, CLP announced that it had received 1,400 applications from the launch of the scheme in October to the end of 2018. More is expected as HK Electric just launched the scheme in January this year.
For businesses that report their Environmental, Social and Governance (ESG) performance, taking part in the scheme is extremely attractive. ESG performances express the environmental and social impact of an organization. Today, most stock exchanges in the world, such as Hong Kong’s stock exchange, make ESG reporting a specific requirement for listed companies.
In the real estate sector, ESG performance is assessed by GRESB (previously known as the Global Real Estate Sustainability Benchmarking). A high GRESB score equates to greater access to institutional capital seeking responsible and sustainable investments and stronger demand from tenants seeking sustainable and greener buildings.
How does Hong Kong compare with the sustainability initiatives of other Asia-Pacific markets? A recent CBRE Research study of office buildings in six major gateway cities in Asia Pacific – Shanghai, Hong Kong, Beijing, Sydney, Singapore and Tokyo – found that 23% have achieved some form of green certification, compared to a ratio of 41% in the U.S.* Shanghai possesses the largest volume of green office space with more than 20 million sq. ft. certified as of 2018.
Singapore and Sydney both have a green certification rate of more than 80% for new office buildings less than five years old, followed by Shanghai and Beijing. Hong Kong, with a rate of around 61%, still has a long way to go.
Hong Kong is a new joiner compared to other markets, but the FiT scheme is a great starting point. It has created an attractive economic incentive on a material topic where the built environment needs to change. In this era of green buildings, Hong Kong is on par with other markets to play a bigger role.
This article is written by Michael Smith, Director, Property Management, CBRE Hong Kong
*Note: The green office building adoption percentage is calculated using CBRE Research data on total office stock. Local green building rating systems are used for Hong Kong, Sydney and Singapore, while LEED is used for Beijing and Shanghai and Tokyo. Sources on the US ratio are the U.S. Green Building Adoption Index 2018 and CBRE. The full report can be found here.