Hong Kong FinTech Week: AI, blockchain will drive ESG investment

By Sunniva Kolostyak

Artificial intelligence (AI), blockchain and data will be essential in creating sustainable investment opportunities as investors are lacking green options, according to a panel at Hong Kong FinTech Week.

At the annual conference, Cecilia Repinski, Founder & CEO of Green Assets Wallet, said the interest in environmental, social and governance (ESG) investing is increasing rapidly.

However, while investors look to deliver on the Paris Agreement and the UN’s Sustainable Investment Goals (SDGs), actual capital reallocation remains limited because investors lack enough green investment opportunities to act upon.

“If we can equip issuers to provide trusted data in a cost-efficient way, we can support more assets to come to the market, and at the same time, make more assets accessible to investors, because they can recognise credible and impactful actors,” Repinski said.

Also speaking at the panel, Chex Yu, Deputy Director of Strategy at Ping An Technology, said AI will be crucial in creating a methodology and standardisation for identifying ESG options.

She said the methodology is still in very early stages, but that the conversation is beginning to look at how climate risks actually impact company valuation and investments.

“A lot of companies are trying to figure out how do we do proper scenario analysis, how do we move from backwards-looking information such as just measuring carbon footprint to actually forward-looking information we where we can project the impact of the technology you invested in to make your company more resilient to climate change,” Yu said.

“I think all of that requires a lot of modelling with AI and big data. And I think the lack of tools in this space right now is why we actually need more of this advanced technology to help us investors and companies to have a standardised way to do this.”

Last year, China became the second-largest green bond issuer nation in the word, and a month ago, its government announced that it will go carbon neutral by 2060, increasing demand for green and sustainable financing to help the transition.

Grace Hui, Head of Green and Sustainable Finance, Markets Division at the Hong Kong Exchanges and Clearing, noted that the transition will require $5.5 trillion of investments over the next 30 years to radically overhaul China’s energy system.

Hui said: “We are already seeing an upward swing on ESG investment activities and strategies, and a resulting demand from investors for better ESG data in terms of quality and quantity, as investors want to ensure that investments are going to the right companies and the right projects to help support the transition to a low-carbon economy, as well as a more sustainable planet.”

Repinski added that providing investors with trusted and quantifiable data together with best-in-class metrics can be a key differentiator for investors as it provides an understanding of the impact and value. Moreover, by utilising blockchain, investors can also ensure that there are no negative side effects, or greenwashing.

“So, even though it’s a fantastic solar panel field for example with lots of excellent impact in terms of renewable energy production, you also need a bit sure there is no conversion of pristine forest etc. involved,” she said.

“We see a lot of untapped opportunities for sustainable asset generation among SMEs and in emerging markets, but these assets need to clearly demonstrate credibility in order to become investable and accessible to global investors for these reasons. With blockchain technology, we can inject immutable trust and we can equip issuers with the technology needed to showcase their credibility and convey trust, as well as quantifiable impact data to the market.”

The theme for Hong Kong FinTech Week 2020 is humanising FinTech, and the conference has also addressed financial inclusion.