Hong Kong’s New World Development pledges to ditch coal as part of ESG targets
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One of the largest foreign direct investors in mainland China, Hong Kong developer New World Development Company, has pledged to divest from coal mines and coal-fired power plants as part of its ESG targets.
The $77 billion property developer plans to achieve 100% renewable energy for its rental properties in the Guangdong-Hong Kong-Macao Greater Bay Area by 2026 and Greater China by 2031.
According to Adrian Cheng, chief executive officer of the Hong Kong conglomerate, the developer will actively invest in renewables and net-zero carbon technologies as China moves towards carbon neutrality by 2050.
“While some of these commitments may seem like short-term financial tradeoffs, we have raised close to $HK20 billion ($2.6 billion) through sustainable financing,” Cheng said during the Asian Financial Forum (AFF) last week.
“Through some of these deals, including the world’s first US dollar real estate developer sustainability-linked bond issued in early 2021, we've also been able to attract global ESG investors and reduce cost of capital,” he added.
In early 2021, the family business issued $200 million 10-year US dollar sustainability-linked bond with a coupon rate of 3.75% to help it achieve decarbonisation targets at its properties.
If it fails to achieve the targets, the company will purchase carbon offsets to an equivalent amount of 25 basis points per annum for the remaining life of the bond.
“Despite ESG investments reaching double-digit trillions, funding for the sustainable development goals of the United Nations is short by $2.5 trillion per year, and some say this funding gap can be attributed to the lack of standards and tax guidance, disclosure and investment decisions,” Cheng noted.
“While we are eagerly waiting for the expert community to expedite ESG standardisation, I would like to call on large businesses and family offices to be better stewards,” he said.
YOUTH TAKES CHARGE
The younger generation of the Cheng family - the third wealthiest in Hong Kong - are taking ESG investment into their family business and investment processes.
Another example is Margaret Zhao, managing partner of Hongtao Asset Management, the family office of a large pharmaceutical company in China.
“As the younger generation, we do look at (ESG) much more closely - we need to know how we are impacting the world through our investments,” Zhao told a panel discussion at AFF.
Hongtao Asset Management’s family office business, HT Capital, was established in 1999 and covers a full spectrum of investment in sectors including healthcare, information and technology, and technology, media, and telecom (TMT) industry, through early and late-stage venture capital, private equity, fund of funds, as well as public markets.
With core management teams in Beijing and Hong Kong, it has a global portfolio of more than 160 investment funds and direct investment in more than 290 companies.
CALL FOR QUANTITATIVE WAYS
Zhao noted that it is often difficult to evaluate the actual impact of private equity investment compared with public markets.
"For family offices, it's not like we're very big institutions, so we don't really have that data to measure how impactful we've been on society," she said, adding that in the future it would be important to collect data in the form of questionnaires on the impact they have been having.
“We want to see if there is an easier way to evaluate the impact all those startup companies that we invest in have been having in a more quantitative way,” she added.
But Zhao said she likes the idea that asset owners can play a bigger role in guiding and helping investees in ESG transition, such as gender equality in companies, better governance, and sharing ESG knowledge to founders of those investees.
HT Capital’s portfolio covers large asset managers KKR, PIMCO, the Carlyle Group, and venture capital firms Plum Ventures, IDG Capital, and Matrix Partners China.
Recently, HT Capital has set up a multifamily investment platform since many family offices in China want to co-invest with it. Through the platform, Zhao said they will share their vision about impact investing, as well as how they invest through their investment network.