Carbon neutrality and investment

Green finance
Carbon neutrality

Author: Mr Chin21/09/2022

Many countries have been actively promoting a low-carbon economy and reducing carbon emissions, hoping to achieve “carbon neutrality” by mid-century to curb global warming and maintain the average global temperature increase below 1.5℃ in this century.

Carbon neutrality generally means we have to remove the same amount of CO2 from the atmosphere for what we emit over a period (usually a year). To achieve carbon neutrality, we need to minimize CO2 emissions and absorb CO2 with the help of natural carbon sinks, such as oceans and forests, or technology.

Phasing out fossil fuels is considered crucial to carbon neutrality. On the one hand, technological advancements have lowered our reliance on fossil fuels, such as oil, coal, and natural gas, and supported the adoption of renewable energy like wind and solar power. On the other hand, many companies and organisations try to achieve carbon neutrality through carbon offsets. They will invest in projects that reduce carbon emissions to offset their carbon emissions. Common carbon offset projects invest in renewable energy, tree planting, and conservation of wetlands and agricultural lands. Developing carbon markets, including setting up an emissions trading system, is another example of carbon offset projects. Co-chaired by the Hong Kong Monetary Authority and the Securities and Futures Commission, the Green and Sustainable Finance Cross-Agency Steering Group published its “preliminary feasibility assessment of carbon market opportunities for Hong Kong“. The group supports the development of Hong Kong as a regional carbon trading centre, including developing a voluntary carbon market.

Close ties with investment

Carbon neutrality is a key global trend as more countries, cities, and enterprises have pledged to be carbon neutral, and Hong Kong will also strive to achieve this goal by 2050. To this end, some governments have enacted or proposed relevant bills or developed policies. Suriname and Bhutan achieved carbon neutrality in 2014 and 2018, respectively.

Carbon neutrality also brings new investment opportunities as it is now a key investment theme highlighted by many concept stocks. Prospective investors interested in this theme should avoid making decisions only based on concepts or sectors. They should understand and be satisfied with the specific commitments and actions were taken by companies to reduce carbon emissions.

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Green finance  Global trend in investment

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