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Speaker 1: Bloomberg Audio Studios.
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Speaker 2: Podcasts. Radio. News. Long gone are the heady days of 2021, where week after week, enormous financial institutions made commitments to transition to a net zero world. Take the example of GFANS, the Glasgow Financial Alliance for Net Zero, one of the signature packs to clean up the sector. It was once on the lips of every climate finance expert. Now, It barely gets a mention. And yet, without the right kind of finance, there is no way to tackle climate change. The money dictates what gets built, where and how quickly. If spent right, it can turbocharge the transition. If not, we will be saddled with polluting assets. Joining me this week is Dr. Ma Jun, chairman of the Hong Kong Green Finance Association and former chief economist of the Central Bank of China. This is Zero. I'm Akshat Rati, recording live at Hong Kong Green Week. Today, where next for climate finance? Dr. Mahjoon, thank you for joining us here at the Bloomberg NEF event. So today we are going to talk about the opportunities and challenges that Asia faces on the energy transition front. And maybe we start by looking back first, because we are sitting in a region that is seeing some of the fastest rollout of green technologies anywhere in the world. You know, be it solar panels in the Philippines, wind turbines in Vietnam, or electric cars in Thailand, or all of those technologies in China. This needed technology development, needed policy, it needed finance, and of course it needed people. But from your vantage point, having worked on finance and green finance for such a long time in this region. What do you think finance did to help Asia get to this point in the transition?
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Speaker 1: Well, thank you very much, Akshay, and also thanks to BNF for inviting me once again. Your question of the three key pillars for transition, one is policy, one is technology, one is finance. I've been working on all of these, but finance has been my really focus in the last 12 years since 2014 when I joined the PBOC, People's Bank of China. I began to work on green finance policies. Before that, I was actually spending 13 years in Hong Kong. I was a chief economist for Deutsche Bank in the greater China region. And in that transition between Deutsche Bank and the PBOC, I sort of turned myself from a macroeconomist towards a climate finance specialist. Now, in my PBOC time, that was starting from 2014, I began to work on the need for green finance. So initially, in China, we're talking about air pollution. And some of you were in Beijing back 12 years ago, we were wearing masks, right? It's not because of COVID. Everybody was fearing about this health impact of PM2. 5 exceeding 100 and so on. So our proposal at that time for the Chinese central government was you need to manage to raise something like a full trillion RMB every year to fix pollution, which include air pollution, land pollution, water contamination and so on. But the government has no money. The government has only 10% of the required a budget. That's why the green finance have to kick in. So very quickly, within a few months, you know, my team was able to convince the central government, let's do it. And in 2015, this proposal of setting up a green financial system was written into the central government document that's called Eco-Civilization Plan. And then it became a mandate for the central bank to lead the coordination of the seven ministries and driving The framework for green finance. So I was doing this job from 2015, 2016, essentially coordinating the central bank, the minister of finance, environmental ministry, and the RC securities commissions and also banking insurance committee. drafting the guideline for green finance. Within the guideline, which at that time contained about 35 actions, we are now seeing the largest green lending market and largest green bond market in the world, which is the Chinese green loans and green bonds. outstanding amounting to about 7 trillion US dollar. It's about 50 trillion RMB. It's a mind-boggling number. These financing instruments in the form of loans and bonds went into renewables, went into electric vehicles. That's why China now had a 70% of the renewable sort of a production capacity, right? Not necessarily deployment in China. And also 70% of the EV production, 70% of batteries in the world.
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Speaker 2: Have the lessons from what China has been able to do, maybe let's take the central bank policy, has that been used or applied or translated in any other part of the world, looking at how China has been able to create this lead in green technologies?
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Speaker 1: China is unique in the sense that the central bank is part of the government. It's not a so-called independent central bank. When a central bank is independent, it anchors its policy only on one or two objectives, which is, for example, CPI being 2% and financial stability. Now, these narrowly focused central banking policies actually restrict the ability of the central bank to deliver climate-related actions. But the Chinese central bank responding to the government responses Yeah, which is, you know, carbon neutrality and all of these, that's the government objective. Then the central bank has to do its part. For example, the Chinese central bank put out this decarbonization facility, which now offers a funding cost of 1.25% for renewables. No other central bank can do that, right? And because all the central banks say, it's none of my mandate. And why should I give cheap money to the, through commercial bank and to renewable projects? Also the central bank in China, we actually rank the commercial banks on their green performance because we mandate each bank to report to the green loans. In China, I think now the only country that has a central bank mandated for the commercial bank to report to green loans based on taxonomy. And that's why each of the 4,000 banks report to the green loan ratio. And we can see which one is doing better. The high ones like 35% green loan ratio, the low one 5%. And obviously, 35% is being praised and being recognized as a good performer. And they got other incentives as well. So this is a very unique incentive, which only China does.
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Speaker 2: So would you say then one thing that maybe central banks abroad can look at is actually growing their mandate from these limited mandates they have, which is on employment and on inflation?
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Speaker 1: Yeah, some central bank try to sort of be more open minded and breaking these traditional rules of central banking rules. And for example, the Central Bank of Hungary, back a few years ago, they were telling me that they have adopted a practice of giving capital relief on green loss, meaning the risk of weights on green assets is being lowered by the Central Bank of Hungary. And in fact, yesterday I was moderating a session And to my surprise, the Central Bank of Macau, which is a major authority in Macau, said that they gave a 15% discount to the capital charge to the green assets as well, which is wonderful. So they're not following the traditional central banking practices and conventions, but they are now making innovation. But these cases are quite rare still.
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Speaker 2: Now, let's talk a little bit about the green bond market, but also just green finance in general. You talked about how In China alone, there's $ 7 trillion worth of outstanding green finance, if you include bonds, loans and equities. Now, some of the green bond issuances have been done in London, for example, and they've been very successful for China and they're looking to do more of these. What is it from the China green bond experience that other countries can learn?
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Speaker 1: Yeah, something other countries wouldn't be able to replicate because China is so big. And I was talking to some small economy that China issues 1,000 green bonds every year. They were shocked, because some smaller countries do a few issuance every year. So that's a size thing. But given the size, you've got advantage, because the cost goes down for all the infrastructure. For example, back in 2015, when I was initiating the green bond market, and we were worried about not having enough of third-party verifiers. And they will struggle to sort of incubate these guys. And then within the year 18, verifies pop up. And initially, the cost of verification was very high, something like 100,000 RMB per piece. And now it goes down to 10,000, right? because of competition and also the scale economy. And then a lot of companies in China are working on AI tools to label green loans. And in smaller markets, the labeling is very expensive because your high consultants, you know, before accounting firm and so on, they charge very high services. And now the Chinese scale economy involved using AI technology. It reduced the cost of these services by 99%. That's the part that we benefit from scale economy. But other things I think a lot of countries' economists can learn in incentives. Some of the Chinese local governments, they offer interest subsidies for green loans and green bonds. And some actually give awards to the first issuance of every green piece, right? Whether it's a green bond for this sector or a sustainability bond for that sector or a social bond for this sector. So every new innovation is being encouraged, which is very cheap in terms of a dollar amount that you need. But it has a very good encouragement in terms of setting examples and creating momentum for the market. So these are things I think that can be delivered in other places.
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Speaker 2: And we talked about how a lot of the transition success has been in the electricity sector, partly because the technologies have been scalable, but also modular. And so prices have come down faster. There are other sectors in the economy that really need to catch up on the transition. The Iran war, for example, has really made countries think about energy security and they are moving away from fossil fuels, but they can only do so in the sectors that are economic and they are doing that on electricity, as we've seen from the import figures from Chinese technologies going into other countries. In other parts of the economy, so industry, for example, there's still a long way to go to try and bring in green technologies. I know you've done some work on the steel sector, but there's steel, there's cement, there's plastics. So many of the industrial sectors still need ways to be able to transition. What can finance do to help the industrial sector transition?
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Speaker 1: Yeah, for the carbon intensive sector that you mentioned, like steel, cement, petrochemical, coal-fired power generation, aviation, shipping, and so on. This is what we call transition finance. Back a few years ago, we were focusing on pure green activities like renewables, electric vehicles, batteries, and so on. And these were very big already, as I said, you know, 50 trillion RMB or 7 trillion US dollar in China, largely for pure green. But now, in the last couple of years, we began to move towards building a ecosystem for transition finance, which is serving the hardware-based sectors. And in China, some experiments by central government, you know, central bank and also local government putting out what they call transition taxonomies. Now 11 sectors have transition taxonomies. Each sector likes steel. The central bank put out the pathways whether you use scrap steel to make steel, that's reduced carbon, or use hydrogen, or use... you know, clean energy, all of these pathways are able to help you to reduce carbon intensity of the steel sector. So once these pathways are done, then we're requiring the companies to develop their transition plan, which means that you need to have a credible transition plan, setting targets for three years, five years, seven years, decarbonization, and then making the government structure working, right, for implementing the targets. At the same time, developing the instruments we have post-systemally linked to loans to assist these companies to transit towards lower cost. At the same time, a lot of Pilot cities are asking them, don't lay off people because you have to take care of the social impact, right? And then this, you know, transition process will be accompanied by, for example, retraining, reskilling program. So all of these elements are incorporated into the ecosystem for transition finance. It's still small in terms of total dollar amount, but the growth has been rapid. I've seen a lot of places where I've seen 100% growth of transition finance in China.
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Speaker 2: And so the thing that is required over here is there is a little more complexity involved, right? In a green bond, you are very clear about what you're going to do and you raise finance toward that purpose. And so investors who are investing in a green bond know what they are getting as a result. Whereas with transition finance, you have to create a plan for some time, there'll be higher emissions and then the emissions will lower. And each sector will have, as you said, different taxonomy, different plan. Are there ways in which that complexity can be managed or simplified? Or is this just how finance works, that complexity is part.
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Speaker 1: Of the business? Now, since evolving, a few years ago, we were talking about every transition company to develop a transition plan in a formal way, setting the targets and getting third-party verification and having a governance structure and so on and so forth. Now, after three years, we find that this is applicable only to large companies. A lot of small, medium companies are unable to develop the full version of the plan. Transition plan the unable to find a third party to verify the numbers because too expensive now that's why recently my colleague was developing a new model for SMEs to get into the transition finance space, which is the call look back transition instruments. meaning that you don't have to pre-develop a transition plan. Just try yourself and see if you can reduce carbon. Once you actually reduce carbon, and coming back to the bank, say, can we claim this is a transition finance? If not meeting a standard, then we forget about it and treat it as a regular loan. Now, this is being practiced in a couple of regions, in China and somewhere else, and now being documented in one of the research reports of my colleague. I think it's worth looking into.
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Speaker 2: After the break, more of my conversation with Dr.
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Speaker 1: Mahjoon.
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Speaker 2: If you're enjoying this episode, please take a moment to rate and review Xero on whichever platform you're listening on. One other hot topic is AI data centers and how the demand for electricity is coming from these data centers. If AI data centers, you know, AI becomes the promised land that it is, They will come here. They will create a challenge for this region. It may not be an electricity supply challenge. It'll be the challenge of how to ensure that electricity supply is clean. Is there something you can do, which is before this boom starts, before we see, you know, either AI data centers getting powered by coal, is there a way to ensure that they remain clean? So it's a different type of transition challenge from the industrial sector. You don't need to convert something that is dirty into clean. You want to start to build something clean from the get-go.
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Speaker 1: Yeah, I think data centers are facing two types of challenges. One is... it competes for energy against other users. For example, this electricity supply is supposed to be for the normal civilian usage, households, manufacturing, buildings, and so on. Now you compete away, which will push up the power price, right? It has a social implication, which is negative for the community. That's one thing. And second challenge is that I see a lot of data centers are built with dirty energy, dirty new energy, which means that they couldn't find the clean energy to supply, and they have to build coal-fired power plants and also maybe burning natural gas. And simply because they say, hey, I'm the project owner and have no other choices, this is the most convenient one that I can deploy. I see this problem needs to be addressed at a higher level, not at a single company level, because many of the renewable resources are not in the place where you build the data center. And it may be somewhere else. For example, recently we are looking at one project which actually does what we call geographical arbitrage. Basically, the data center in Singapore, it doesn't have enough power. It doesn't have enough green power. So they find a place in the nearby island of Indonesia, and they build a large solar panel production facility to generate hydrogen, and they ship hydrogen to Singapore to power the data center. And still the economic works because the power tariff is high enough in Singapore and it's still cheaper and it becomes greener. But it requires coordination and it requires import-export arrangement. So it's not a simple one company issue. It requires government-to-government geographical coordination.
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Speaker 2: Now, coming to one of your hats, which is the Hong Kong Green Finance Association, you know, Hong Kong remains among the top financial centers in the world. Can you talk through the role that Hong Kong has played in green financing, especially in the last 10 years? And where does it go from here?
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Speaker 1: Yeah, Hong Kong started its journey towards building a green finance center, I think, 2017-18, when the government began to issue It's sovereign green bond. And I think Hong Kong remains the largest sovereign issuers in the green bond market in the world. And this sets a very good example for private sector in terms of how to identify what is green, how to do the labeling, how to do the transparency, disclosure, and so on. And now Hong Kong offers a very sophisticated set of green financial products, including syndicated loans and green bonds, sustainability bonds, and now insurance and equity bonds. services for all kinds of green activities, not just in Hong Kong, but the majority of the fundraisers actually coming from mainland China and ASEAN countries to use the Hong Kong green financial services. And going forward, I think the demand is going to be even stronger. As I said yesterday at Hong Kong GFA annual meeting, China is now implementing its five-year plan, which requires 17% reduction of carbon intensity in the next five years. It will drive massive demand for transition. Hong Kong can be the offering of a lot of transition products. And ASEAN, I use this example why ASEAN is going to be growing even faster than China in terms of green demand. Because Indonesia, you average have three babies per family, right? In China, have only zero. 0.7. So in the future, you will see a massive growth of demand for virtually everything, right? For housing, for transportation, for energy, for water. All of these require to be green. And the green investments growth, I think, in ASEAN countries will be even faster. And that's why financing and China technology combined, I think, really can make a big difference there.
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Speaker 2: And maybe let's talk about one finance instrument that has been used for all sorts of activities, but increasingly for green activities. So Panda bonds, for example, which are these Chinese yuan denominated bonds that are issued by entities outside mainland, but have investors from mainland. Now they've been issued in places like the Philippines, Indonesia and Pakistan, but also in Europe, in Hungary and in Portugal. And some have been specifically, you know, the goal for them when they are announcing the bond issuance is toward green activities, sometimes buying the very green technologies from China.
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Speaker 1: For those purposes. How do you see.
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Speaker 2: The Panda bond market evolving and whether that can help the transition in other parts of the world?
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Speaker 1: Yeah, I think it's developing very fast. Back a little more than a year ago, I was beginning to write about the Panda bond market to play a bigger role in transition, you know, green transition for the global south. Now I've seen very rapid growth of this take-up. In fact, in the last eight months, the issuance of PANDA bonds in the mainland market is about 200 billion RMB. And similarly, we have a RMB denominated market, which is offshore RMB market in Hong Kong. It's called Dinson Bond Market. And so something like 1 trillion RMB issuance. And this means that the RMB funding is cheap enough to attract a lot of issuers relative to U.S. dollar funding, right? More recently, I think it's the Pakistani issuance of a Panda Bond in China, which was issued at a coupon rate of 2.5%. You cannot imagine that in any other markets. Of course, it was a guarantee from AIIB and ADB. But even with that, I think it substantially reduced the cost, total cost of financing for the green activities in Pakistan. And many others are lining up to do that. Also recently, there was issuance from Suzano, which is a company in Brazil that tapped into the Chinese Green Panda bond market. And there are many more in the Hong Kong Ding Seng bond market. So it's a matter of a promotion because the platform is there, the chief funding cost is there, liquidity is there. It's not everybody knows it. In fact, when I was in Central Asia just a couple weeks ago I was talking to three banks and In Kyrgyz Republic, none of them knew that China had the Penderbilt market and Hong Kong has the Dingshengbong market, which offers a much cheaper funding cost, and otherwise they all showed interest immediately in this potential fundraising opportunity for them. So I think we need to do more. In fact, BNF can be the good distributor of this message to potential issuers.
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Speaker 2: Yeah, we've also seen some countries actually change their sovereign bond issuances from being dollar denominated to yuan denominated because of the rising trade relationships they have. So Kenya has done it. Ethiopia is looking to do it. There's clearly a demand for more yuan denominated debt. But when we come to that, let's then talk about the tensions that are rising as a result. The global bond market has been a dollar dominated one. And now the UN is offering these options for many countries to try and get lower financing costs, which is especially at this time of higher cost of living, but also really squeezed government finances is something that they are tapping into. how do you manage to ensure that the tensions that are rising don't derail the transition? So take Europe, for example. You know, Europe has created a carbon border adjustment mechanism that is creating tensions between Europe and China, but also Europe and India. You know, what are ways in which finance can try and help manage around what are geopolitical tensions that are going to perhaps keep rising.
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Speaker 1: Some of the tensions you mentioned, geopolitical in nature, others are basically tree fractions. For example, a lot of EU actions are trade related because they're fearing China taking over their jobs and China become too competitive in certain markets and so on. But some of the tensions, especially on the U.S. side, it's more geopolitics, right? Restricting access to all these high-tech products and other technologies. But I think in the Global South in general, We don't have that much of concern. You know, China versus ASEAN country, China with Latin America, China with African country, the trade is still largely free. And largely because we are quite complementary to each other in terms of economic structure. Most of the stuff that China produces, they don't produce and they need our stuff, right? Of course, China... would like to invest more in this developing country and relocating part of the supply chain, whether it's EV or its other manufacturing processes, so that we can not only lower the cost, because it is producing locally and also creating jobs and building skills, and building a long-lasting mutually benefiting relationship between China and the global south. I think overall this is doing well. But there's a way for China to enter the US and the European market by relocating production to some emerging market developing countries. For example, I was in Morocco recently, and there are industrial parks there. They welcome Chinese companies to invest. in the industrial park, as long as you have enough of local contents developed in Morocco, then you can sell to Europe, legally, right? It's not just illegally bypassing regulation, it's a legal pathway towards the European market. But that requires a lot of, you know, cooperation, engineering, and the legal device, and the structuring of these transactions.
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Speaker 2: Is there anything on the finance sector that can help this transition happen? So, for example, you mentioned Morocco, but also Brazil is another place where Chinese companies are relocating some of their manufacturing. BYD opened a plant recently. Is there anything that finance can help make these moves for Chinese companies easier in emerging markets?
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Speaker 1: Finance plays a bigger role for mid-sized companies to drive their actions. For the very large companies, they don't worry about finance because they are very strong in terms of internal financing capability. And the banks are looking for them, begging them to borrow money. But in the mid-market, a lot of companies which are not capable of investing in a big project entirely by its internal resource, then it relies on external financing. That's why These financing sources, whether it's multinational development bank or sovereign wealth company or large commercial bank, they can drive the company's relocation. of production and helping them to structure a transaction which is suitable for them to enter into multiple markets. And this is exactly what the Green Accelerator, which I launched yesterday, intend to do because we're bringing these large financial institutions to influence these companies in terms of future decision.
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Speaker 2: Can you give an example of what the Green Accelerator might do?
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Speaker 1: The Green Accelerator is set up as a nonprofit entity in Hong Kong, which is supported by donors and also the Hong Kong government to prepare green projects in developing countries. Of course, there might be pilot projects in Hong Kong before we go out and scaling up the operation. And the funding members are actually the seven funding members of the Green Accelerator, including AIIB, Asian Infrastructure Investment Bank, the Chinese Sovereign Wealth Company called Silk Road Fund, and GenZero under Temasek, and also HFBC, a couple of others, including my Institute of Finance and Sustainability in Beijing, and also Cambridge Institute of Sustainability Leadership, plus the Hong Kong EPD, the Environmental Protection Department. So we are coming together with the goal of really accelerating and helping these companies to prepare bankable projects, which can be investable by large organizations such as the one that I just mentioned. And in the process, a couple of things need to be done by the accelerator. Number one, we identify the right green technology for other markets. Just give you an example, the Chinese company that can produce desalinated water at a much lower cost than otherwise, right? And they are now using this, what we call modular-based approach to build a desalination plant within one month, instead of doing this within 12 months. And as a result, they're able to cut the cost of water by about 50%. So we're looking into how to help this company to actually locate their production in Indonesia. Indonesia needs desalination services. This is just one of the many examples how finance can help them to think about this you know, deployment of their good technology in the new places that need them more than in China.
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Speaker 2: I live in London. You know, when we look at conversations around the transition or around climate politics, it feels like a step back because many of the governments, especially in the US, but also some European governments, have slowed down the transition or have reversed some of their climate policies. The pressure that investors had on corporations, on big multinationals with headquarters in Europe and America to come up with a transition plan to meet their net zero commitments, that pressure has gone down a little bit. Conversations here are very different. Over here, the pressure to come up with transition plans, et cetera, are newer, but they are growing. I mean, if you talked about the carbon intensity goal from China, that is really going to drive many of the Chinese companies to look at cutting emissions alongside, of course, all the profitable things that they have to do. Do you see this sort of bifurcation slowing down progress on the climate front?
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Speaker 1: I think one big problem in some of the Western countries is that the government is short of money. Yeah, before, maybe before the Iran war and a lot of geopolitics development, they were still able to allocate some money to subsidize the green transition. And now, you know, they are given the mandate to increase budget spending and they're doing a lot of other things. So there's a little room, fiscal room, right, to subsidize. And now it become a you know, a game of competing for, you know, very, very limited fiscal favor, whether you want to do this for healthcare, for the elderly, for immigration, or for transition, yeah? And if you're squeezed, then, you know, everybody complain, you know, who's going to pay for that? I think the way out of this is do not rely on government subsidy. Instead, rely on technology. There are a couple of examples which can show how massive the technology can save the journey towards net zero. In China, in the last seven years, the cost of battery went down by 70%. The cost of solar panel came down close to 70%. And the cost of EV came down by 50%. If countries can engineer this kind of reduction in cost, you don't need government subsidies. But these green goods and services become competitive by themselves. They compete away the fossil fuel powered alternatives. This is, I think, should be the real focus of, you know, government and industrial policy rather than, you know, competing for limited fiscal resources for subsidy.
00:32:13
Speaker 2: We saw in some of the numbers that even in the U.S. where we are seeing probably the clearest step back on climate policy, you know, renewable investments go down a little bit over the next few years, but then they rise up again. Sort of speaking to your point about technology, because the cost makes the difference. But then you look at.
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Speaker 1: That versus what is needed.
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Speaker 2: We are living through an El Nino year right now, getting us a flavor of what global warming will look like in five or 10 years' time. This year will be the hottest year, and then next year is likely to break that record again because El Nino is going to continue. In the face of what we are seeing in rising impacts, are there ways in which finance can come to help on adaptation, for example? There was a typhoon recently here in the southwest of China. There was massive heat waves where I was in Europe over the summer, five or six of them continuously. And, you know, we don't have air conditioning like you guys have here in Hong Kong. Are there ways in which finance can help adaptation?
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Speaker 1: Yeah. Now, let me talk about the two sort of climate resilience issues. One is the heat wave you're talking about. The other one is water shortage issues. And we can address it by very cheap energy here. Cheap solar energy, yeah. And the Chinese solar power, if you deploy properly, in fact, in one of the pilots, my institute has done, within my institute, we generate power at about 30 cents RMB per kilowatt, which is about four cents US dollar, yeah. It's five times in probably European price. If it's so cheap, everybody has air conditioning, right? If it's too expensive, you cannot afford it. So make it cheaper, which is technology available, just a matter of deployment. So I think heatwave is another problem here. As long as you can arrange the cheaper power that's being deployed in every corner of the country. Water, as I said, we've got a lot of water technology, especially in the portfolio that we are proposing to promote in the Green Accelerator, at least 10 technologies. for example the water saving technology for agriculture which is called smart irrigation reduces use of water 30-40% at the same time increasing crop yields by 20% and also the what they call rain enhancement technology basically in the place you know that's close to a desert you can shoot sound wave to the sky and it rains within 30 minutes and climate resilient seeds which mean that you can plant the new seeds that could be rice or wheat that reduces use of water by 30, 40% as well. So there are many, many technologies available. Just deploy them. It will address a large part of the other drought problem.
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Speaker 2: If I'm taking one big message from our discussion is that you started as a macroeconomist and you focused on green finance. But so much of what you talk about now is how to enable finance to really unlock technology deployment because the technologies that have been developed is really the deployment of these technologies that is uneven and that needs to be sped up.
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Speaker 1: In different parts of the world.
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Speaker 2: Do your colleagues in finance see it the same way or are you evangelizing at a place where others aren't seeing it?
00:35:27
Speaker 1: Yeah, this is exactly what I told a lot of bankers last night at the HLBC event here. I see most of the bankers, they're sitting there waiting for the technology companies to come to them, waiting for the bankable projects to come to them. But what we need now is we go out and create a bankable projects. And this requires the bankers to know technology and understand what are the new technology that can reduce the cost of the services and production so that we can assemble these projects. And the real problem in global especially the global south system of finance market is that they don't lack money but they lack bankable projects in fact i quoted a number yesterday saying that 90 percent of the green project proposed to the local banks in the emerging market are being rejected which means that we need a lot of service a lot of help making these projects more bankable especially using the appropriate technology thank you majun thank you very much.
00:36:35
Speaker 2: And thank you for listening to Xero. This episode was recorded live at Hong Kong Green Week. Now for the sound of the week. That's not the sound of a chainsaw chopping through a tree. That's the sound of a lyrebird, an incredible natural mimic that lives in Australia. If you liked this episode, please take a moment to rate and review the show on Apple Podcasts, YouTube and Spotify. This episode was produced by Oscar Boyd. Special thanks to the team at Bloomberg NEF and also to Samar Saadi, Ishika Mukherjee and Alyssa McDonald. I'm Akshat Rati, back soon.
Speaker 1: Bloomberg Audio Studios.
00:00:04
Speaker 2: Podcasts. Radio. News. Long gone are the heady days of 2021, where week after week, enormous financial institutions made commitments to transition to a net zero world. Take the example of GFANS, the Glasgow Financial Alliance for Net Zero, one of the signature packs to clean up the sector. It was once on the lips of every climate finance expert. Now, It barely gets a mention. And yet, without the right kind of finance, there is no way to tackle climate change. The money dictates what gets built, where and how quickly. If spent right, it can turbocharge the transition. If not, we will be saddled with polluting assets. Joining me this week is Dr. Ma Jun, chairman of the Hong Kong Green Finance Association and former chief economist of the Central Bank of China. This is Zero. I'm Akshat Rati, recording live at Hong Kong Green Week. Today, where next for climate finance? Dr. Mahjoon, thank you for joining us here at the Bloomberg NEF event. So today we are going to talk about the opportunities and challenges that Asia faces on the energy transition front. And maybe we start by looking back first, because we are sitting in a region that is seeing some of the fastest rollout of green technologies anywhere in the world. You know, be it solar panels in the Philippines, wind turbines in Vietnam, or electric cars in Thailand, or all of those technologies in China. This needed technology development, needed policy, it needed finance, and of course it needed people. But from your vantage point, having worked on finance and green finance for such a long time in this region. What do you think finance did to help Asia get to this point in the transition?
00:02:05
Speaker 1: Well, thank you very much, Akshay, and also thanks to BNF for inviting me once again. Your question of the three key pillars for transition, one is policy, one is technology, one is finance. I've been working on all of these, but finance has been my really focus in the last 12 years since 2014 when I joined the PBOC, People's Bank of China. I began to work on green finance policies. Before that, I was actually spending 13 years in Hong Kong. I was a chief economist for Deutsche Bank in the greater China region. And in that transition between Deutsche Bank and the PBOC, I sort of turned myself from a macroeconomist towards a climate finance specialist. Now, in my PBOC time, that was starting from 2014, I began to work on the need for green finance. So initially, in China, we're talking about air pollution. And some of you were in Beijing back 12 years ago, we were wearing masks, right? It's not because of COVID. Everybody was fearing about this health impact of PM2. 5 exceeding 100 and so on. So our proposal at that time for the Chinese central government was you need to manage to raise something like a full trillion RMB every year to fix pollution, which include air pollution, land pollution, water contamination and so on. But the government has no money. The government has only 10% of the required a budget. That's why the green finance have to kick in. So very quickly, within a few months, you know, my team was able to convince the central government, let's do it. And in 2015, this proposal of setting up a green financial system was written into the central government document that's called Eco-Civilization Plan. And then it became a mandate for the central bank to lead the coordination of the seven ministries and driving The framework for green finance. So I was doing this job from 2015, 2016, essentially coordinating the central bank, the minister of finance, environmental ministry, and the RC securities commissions and also banking insurance committee. drafting the guideline for green finance. Within the guideline, which at that time contained about 35 actions, we are now seeing the largest green lending market and largest green bond market in the world, which is the Chinese green loans and green bonds. outstanding amounting to about 7 trillion US dollar. It's about 50 trillion RMB. It's a mind-boggling number. These financing instruments in the form of loans and bonds went into renewables, went into electric vehicles. That's why China now had a 70% of the renewable sort of a production capacity, right? Not necessarily deployment in China. And also 70% of the EV production, 70% of batteries in the world.
00:04:59
Speaker 2: Have the lessons from what China has been able to do, maybe let's take the central bank policy, has that been used or applied or translated in any other part of the world, looking at how China has been able to create this lead in green technologies?
00:05:14
Speaker 1: China is unique in the sense that the central bank is part of the government. It's not a so-called independent central bank. When a central bank is independent, it anchors its policy only on one or two objectives, which is, for example, CPI being 2% and financial stability. Now, these narrowly focused central banking policies actually restrict the ability of the central bank to deliver climate-related actions. But the Chinese central bank responding to the government responses Yeah, which is, you know, carbon neutrality and all of these, that's the government objective. Then the central bank has to do its part. For example, the Chinese central bank put out this decarbonization facility, which now offers a funding cost of 1.25% for renewables. No other central bank can do that, right? And because all the central banks say, it's none of my mandate. And why should I give cheap money to the, through commercial bank and to renewable projects? Also the central bank in China, we actually rank the commercial banks on their green performance because we mandate each bank to report to the green loans. In China, I think now the only country that has a central bank mandated for the commercial bank to report to green loans based on taxonomy. And that's why each of the 4,000 banks report to the green loan ratio. And we can see which one is doing better. The high ones like 35% green loan ratio, the low one 5%. And obviously, 35% is being praised and being recognized as a good performer. And they got other incentives as well. So this is a very unique incentive, which only China does.
00:06:47
Speaker 2: So would you say then one thing that maybe central banks abroad can look at is actually growing their mandate from these limited mandates they have, which is on employment and on inflation?
00:06:59
Speaker 1: Yeah, some central bank try to sort of be more open minded and breaking these traditional rules of central banking rules. And for example, the Central Bank of Hungary, back a few years ago, they were telling me that they have adopted a practice of giving capital relief on green loss, meaning the risk of weights on green assets is being lowered by the Central Bank of Hungary. And in fact, yesterday I was moderating a session And to my surprise, the Central Bank of Macau, which is a major authority in Macau, said that they gave a 15% discount to the capital charge to the green assets as well, which is wonderful. So they're not following the traditional central banking practices and conventions, but they are now making innovation. But these cases are quite rare still.
00:07:45
Speaker 2: Now, let's talk a little bit about the green bond market, but also just green finance in general. You talked about how In China alone, there's $ 7 trillion worth of outstanding green finance, if you include bonds, loans and equities. Now, some of the green bond issuances have been done in London, for example, and they've been very successful for China and they're looking to do more of these. What is it from the China green bond experience that other countries can learn?
00:08:13
Speaker 1: Yeah, something other countries wouldn't be able to replicate because China is so big. And I was talking to some small economy that China issues 1,000 green bonds every year. They were shocked, because some smaller countries do a few issuance every year. So that's a size thing. But given the size, you've got advantage, because the cost goes down for all the infrastructure. For example, back in 2015, when I was initiating the green bond market, and we were worried about not having enough of third-party verifiers. And they will struggle to sort of incubate these guys. And then within the year 18, verifies pop up. And initially, the cost of verification was very high, something like 100,000 RMB per piece. And now it goes down to 10,000, right? because of competition and also the scale economy. And then a lot of companies in China are working on AI tools to label green loans. And in smaller markets, the labeling is very expensive because your high consultants, you know, before accounting firm and so on, they charge very high services. And now the Chinese scale economy involved using AI technology. It reduced the cost of these services by 99%. That's the part that we benefit from scale economy. But other things I think a lot of countries' economists can learn in incentives. Some of the Chinese local governments, they offer interest subsidies for green loans and green bonds. And some actually give awards to the first issuance of every green piece, right? Whether it's a green bond for this sector or a sustainability bond for that sector or a social bond for this sector. So every new innovation is being encouraged, which is very cheap in terms of a dollar amount that you need. But it has a very good encouragement in terms of setting examples and creating momentum for the market. So these are things I think that can be delivered in other places.
00:10:09
Speaker 2: And we talked about how a lot of the transition success has been in the electricity sector, partly because the technologies have been scalable, but also modular. And so prices have come down faster. There are other sectors in the economy that really need to catch up on the transition. The Iran war, for example, has really made countries think about energy security and they are moving away from fossil fuels, but they can only do so in the sectors that are economic and they are doing that on electricity, as we've seen from the import figures from Chinese technologies going into other countries. In other parts of the economy, so industry, for example, there's still a long way to go to try and bring in green technologies. I know you've done some work on the steel sector, but there's steel, there's cement, there's plastics. So many of the industrial sectors still need ways to be able to transition. What can finance do to help the industrial sector transition?
00:11:10
Speaker 1: Yeah, for the carbon intensive sector that you mentioned, like steel, cement, petrochemical, coal-fired power generation, aviation, shipping, and so on. This is what we call transition finance. Back a few years ago, we were focusing on pure green activities like renewables, electric vehicles, batteries, and so on. And these were very big already, as I said, you know, 50 trillion RMB or 7 trillion US dollar in China, largely for pure green. But now, in the last couple of years, we began to move towards building a ecosystem for transition finance, which is serving the hardware-based sectors. And in China, some experiments by central government, you know, central bank and also local government putting out what they call transition taxonomies. Now 11 sectors have transition taxonomies. Each sector likes steel. The central bank put out the pathways whether you use scrap steel to make steel, that's reduced carbon, or use hydrogen, or use... you know, clean energy, all of these pathways are able to help you to reduce carbon intensity of the steel sector. So once these pathways are done, then we're requiring the companies to develop their transition plan, which means that you need to have a credible transition plan, setting targets for three years, five years, seven years, decarbonization, and then making the government structure working, right, for implementing the targets. At the same time, developing the instruments we have post-systemally linked to loans to assist these companies to transit towards lower cost. At the same time, a lot of Pilot cities are asking them, don't lay off people because you have to take care of the social impact, right? And then this, you know, transition process will be accompanied by, for example, retraining, reskilling program. So all of these elements are incorporated into the ecosystem for transition finance. It's still small in terms of total dollar amount, but the growth has been rapid. I've seen a lot of places where I've seen 100% growth of transition finance in China.
00:13:10
Speaker 2: And so the thing that is required over here is there is a little more complexity involved, right? In a green bond, you are very clear about what you're going to do and you raise finance toward that purpose. And so investors who are investing in a green bond know what they are getting as a result. Whereas with transition finance, you have to create a plan for some time, there'll be higher emissions and then the emissions will lower. And each sector will have, as you said, different taxonomy, different plan. Are there ways in which that complexity can be managed or simplified? Or is this just how finance works, that complexity is part.
00:13:48
Speaker 1: Of the business? Now, since evolving, a few years ago, we were talking about every transition company to develop a transition plan in a formal way, setting the targets and getting third-party verification and having a governance structure and so on and so forth. Now, after three years, we find that this is applicable only to large companies. A lot of small, medium companies are unable to develop the full version of the plan. Transition plan the unable to find a third party to verify the numbers because too expensive now that's why recently my colleague was developing a new model for SMEs to get into the transition finance space, which is the call look back transition instruments. meaning that you don't have to pre-develop a transition plan. Just try yourself and see if you can reduce carbon. Once you actually reduce carbon, and coming back to the bank, say, can we claim this is a transition finance? If not meeting a standard, then we forget about it and treat it as a regular loan. Now, this is being practiced in a couple of regions, in China and somewhere else, and now being documented in one of the research reports of my colleague. I think it's worth looking into.
00:15:02
Speaker 2: After the break, more of my conversation with Dr.
00:15:04
Speaker 1: Mahjoon.
00:15:05
Speaker 2: If you're enjoying this episode, please take a moment to rate and review Xero on whichever platform you're listening on. One other hot topic is AI data centers and how the demand for electricity is coming from these data centers. If AI data centers, you know, AI becomes the promised land that it is, They will come here. They will create a challenge for this region. It may not be an electricity supply challenge. It'll be the challenge of how to ensure that electricity supply is clean. Is there something you can do, which is before this boom starts, before we see, you know, either AI data centers getting powered by coal, is there a way to ensure that they remain clean? So it's a different type of transition challenge from the industrial sector. You don't need to convert something that is dirty into clean. You want to start to build something clean from the get-go.
00:16:08
Speaker 1: Yeah, I think data centers are facing two types of challenges. One is... it competes for energy against other users. For example, this electricity supply is supposed to be for the normal civilian usage, households, manufacturing, buildings, and so on. Now you compete away, which will push up the power price, right? It has a social implication, which is negative for the community. That's one thing. And second challenge is that I see a lot of data centers are built with dirty energy, dirty new energy, which means that they couldn't find the clean energy to supply, and they have to build coal-fired power plants and also maybe burning natural gas. And simply because they say, hey, I'm the project owner and have no other choices, this is the most convenient one that I can deploy. I see this problem needs to be addressed at a higher level, not at a single company level, because many of the renewable resources are not in the place where you build the data center. And it may be somewhere else. For example, recently we are looking at one project which actually does what we call geographical arbitrage. Basically, the data center in Singapore, it doesn't have enough power. It doesn't have enough green power. So they find a place in the nearby island of Indonesia, and they build a large solar panel production facility to generate hydrogen, and they ship hydrogen to Singapore to power the data center. And still the economic works because the power tariff is high enough in Singapore and it's still cheaper and it becomes greener. But it requires coordination and it requires import-export arrangement. So it's not a simple one company issue. It requires government-to-government geographical coordination.
00:18:07
Speaker 2: Now, coming to one of your hats, which is the Hong Kong Green Finance Association, you know, Hong Kong remains among the top financial centers in the world. Can you talk through the role that Hong Kong has played in green financing, especially in the last 10 years? And where does it go from here?
00:18:25
Speaker 1: Yeah, Hong Kong started its journey towards building a green finance center, I think, 2017-18, when the government began to issue It's sovereign green bond. And I think Hong Kong remains the largest sovereign issuers in the green bond market in the world. And this sets a very good example for private sector in terms of how to identify what is green, how to do the labeling, how to do the transparency, disclosure, and so on. And now Hong Kong offers a very sophisticated set of green financial products, including syndicated loans and green bonds, sustainability bonds, and now insurance and equity bonds. services for all kinds of green activities, not just in Hong Kong, but the majority of the fundraisers actually coming from mainland China and ASEAN countries to use the Hong Kong green financial services. And going forward, I think the demand is going to be even stronger. As I said yesterday at Hong Kong GFA annual meeting, China is now implementing its five-year plan, which requires 17% reduction of carbon intensity in the next five years. It will drive massive demand for transition. Hong Kong can be the offering of a lot of transition products. And ASEAN, I use this example why ASEAN is going to be growing even faster than China in terms of green demand. Because Indonesia, you average have three babies per family, right? In China, have only zero. 0.7. So in the future, you will see a massive growth of demand for virtually everything, right? For housing, for transportation, for energy, for water. All of these require to be green. And the green investments growth, I think, in ASEAN countries will be even faster. And that's why financing and China technology combined, I think, really can make a big difference there.
00:20:13
Speaker 2: And maybe let's talk about one finance instrument that has been used for all sorts of activities, but increasingly for green activities. So Panda bonds, for example, which are these Chinese yuan denominated bonds that are issued by entities outside mainland, but have investors from mainland. Now they've been issued in places like the Philippines, Indonesia and Pakistan, but also in Europe, in Hungary and in Portugal. And some have been specifically, you know, the goal for them when they are announcing the bond issuance is toward green activities, sometimes buying the very green technologies from China.
00:20:50
Speaker 1: For those purposes. How do you see.
00:20:53
Speaker 2: The Panda bond market evolving and whether that can help the transition in other parts of the world?
00:21:00
Speaker 1: Yeah, I think it's developing very fast. Back a little more than a year ago, I was beginning to write about the Panda bond market to play a bigger role in transition, you know, green transition for the global south. Now I've seen very rapid growth of this take-up. In fact, in the last eight months, the issuance of PANDA bonds in the mainland market is about 200 billion RMB. And similarly, we have a RMB denominated market, which is offshore RMB market in Hong Kong. It's called Dinson Bond Market. And so something like 1 trillion RMB issuance. And this means that the RMB funding is cheap enough to attract a lot of issuers relative to U.S. dollar funding, right? More recently, I think it's the Pakistani issuance of a Panda Bond in China, which was issued at a coupon rate of 2.5%. You cannot imagine that in any other markets. Of course, it was a guarantee from AIIB and ADB. But even with that, I think it substantially reduced the cost, total cost of financing for the green activities in Pakistan. And many others are lining up to do that. Also recently, there was issuance from Suzano, which is a company in Brazil that tapped into the Chinese Green Panda bond market. And there are many more in the Hong Kong Ding Seng bond market. So it's a matter of a promotion because the platform is there, the chief funding cost is there, liquidity is there. It's not everybody knows it. In fact, when I was in Central Asia just a couple weeks ago I was talking to three banks and In Kyrgyz Republic, none of them knew that China had the Penderbilt market and Hong Kong has the Dingshengbong market, which offers a much cheaper funding cost, and otherwise they all showed interest immediately in this potential fundraising opportunity for them. So I think we need to do more. In fact, BNF can be the good distributor of this message to potential issuers.
00:23:07
Speaker 2: Yeah, we've also seen some countries actually change their sovereign bond issuances from being dollar denominated to yuan denominated because of the rising trade relationships they have. So Kenya has done it. Ethiopia is looking to do it. There's clearly a demand for more yuan denominated debt. But when we come to that, let's then talk about the tensions that are rising as a result. The global bond market has been a dollar dominated one. And now the UN is offering these options for many countries to try and get lower financing costs, which is especially at this time of higher cost of living, but also really squeezed government finances is something that they are tapping into. how do you manage to ensure that the tensions that are rising don't derail the transition? So take Europe, for example. You know, Europe has created a carbon border adjustment mechanism that is creating tensions between Europe and China, but also Europe and India. You know, what are ways in which finance can try and help manage around what are geopolitical tensions that are going to perhaps keep rising.
00:24:21
Speaker 1: Some of the tensions you mentioned, geopolitical in nature, others are basically tree fractions. For example, a lot of EU actions are trade related because they're fearing China taking over their jobs and China become too competitive in certain markets and so on. But some of the tensions, especially on the U.S. side, it's more geopolitics, right? Restricting access to all these high-tech products and other technologies. But I think in the Global South in general, We don't have that much of concern. You know, China versus ASEAN country, China with Latin America, China with African country, the trade is still largely free. And largely because we are quite complementary to each other in terms of economic structure. Most of the stuff that China produces, they don't produce and they need our stuff, right? Of course, China... would like to invest more in this developing country and relocating part of the supply chain, whether it's EV or its other manufacturing processes, so that we can not only lower the cost, because it is producing locally and also creating jobs and building skills, and building a long-lasting mutually benefiting relationship between China and the global south. I think overall this is doing well. But there's a way for China to enter the US and the European market by relocating production to some emerging market developing countries. For example, I was in Morocco recently, and there are industrial parks there. They welcome Chinese companies to invest. in the industrial park, as long as you have enough of local contents developed in Morocco, then you can sell to Europe, legally, right? It's not just illegally bypassing regulation, it's a legal pathway towards the European market. But that requires a lot of, you know, cooperation, engineering, and the legal device, and the structuring of these transactions.
00:26:20
Speaker 2: Is there anything on the finance sector that can help this transition happen? So, for example, you mentioned Morocco, but also Brazil is another place where Chinese companies are relocating some of their manufacturing. BYD opened a plant recently. Is there anything that finance can help make these moves for Chinese companies easier in emerging markets?
00:26:42
Speaker 1: Finance plays a bigger role for mid-sized companies to drive their actions. For the very large companies, they don't worry about finance because they are very strong in terms of internal financing capability. And the banks are looking for them, begging them to borrow money. But in the mid-market, a lot of companies which are not capable of investing in a big project entirely by its internal resource, then it relies on external financing. That's why These financing sources, whether it's multinational development bank or sovereign wealth company or large commercial bank, they can drive the company's relocation. of production and helping them to structure a transaction which is suitable for them to enter into multiple markets. And this is exactly what the Green Accelerator, which I launched yesterday, intend to do because we're bringing these large financial institutions to influence these companies in terms of future decision.
00:27:41
Speaker 2: Can you give an example of what the Green Accelerator might do?
00:27:44
Speaker 1: The Green Accelerator is set up as a nonprofit entity in Hong Kong, which is supported by donors and also the Hong Kong government to prepare green projects in developing countries. Of course, there might be pilot projects in Hong Kong before we go out and scaling up the operation. And the funding members are actually the seven funding members of the Green Accelerator, including AIIB, Asian Infrastructure Investment Bank, the Chinese Sovereign Wealth Company called Silk Road Fund, and GenZero under Temasek, and also HFBC, a couple of others, including my Institute of Finance and Sustainability in Beijing, and also Cambridge Institute of Sustainability Leadership, plus the Hong Kong EPD, the Environmental Protection Department. So we are coming together with the goal of really accelerating and helping these companies to prepare bankable projects, which can be investable by large organizations such as the one that I just mentioned. And in the process, a couple of things need to be done by the accelerator. Number one, we identify the right green technology for other markets. Just give you an example, the Chinese company that can produce desalinated water at a much lower cost than otherwise, right? And they are now using this, what we call modular-based approach to build a desalination plant within one month, instead of doing this within 12 months. And as a result, they're able to cut the cost of water by about 50%. So we're looking into how to help this company to actually locate their production in Indonesia. Indonesia needs desalination services. This is just one of the many examples how finance can help them to think about this you know, deployment of their good technology in the new places that need them more than in China.
00:29:40
Speaker 2: I live in London. You know, when we look at conversations around the transition or around climate politics, it feels like a step back because many of the governments, especially in the US, but also some European governments, have slowed down the transition or have reversed some of their climate policies. The pressure that investors had on corporations, on big multinationals with headquarters in Europe and America to come up with a transition plan to meet their net zero commitments, that pressure has gone down a little bit. Conversations here are very different. Over here, the pressure to come up with transition plans, et cetera, are newer, but they are growing. I mean, if you talked about the carbon intensity goal from China, that is really going to drive many of the Chinese companies to look at cutting emissions alongside, of course, all the profitable things that they have to do. Do you see this sort of bifurcation slowing down progress on the climate front?
00:30:38
Speaker 1: I think one big problem in some of the Western countries is that the government is short of money. Yeah, before, maybe before the Iran war and a lot of geopolitics development, they were still able to allocate some money to subsidize the green transition. And now, you know, they are given the mandate to increase budget spending and they're doing a lot of other things. So there's a little room, fiscal room, right, to subsidize. And now it become a you know, a game of competing for, you know, very, very limited fiscal favor, whether you want to do this for healthcare, for the elderly, for immigration, or for transition, yeah? And if you're squeezed, then, you know, everybody complain, you know, who's going to pay for that? I think the way out of this is do not rely on government subsidy. Instead, rely on technology. There are a couple of examples which can show how massive the technology can save the journey towards net zero. In China, in the last seven years, the cost of battery went down by 70%. The cost of solar panel came down close to 70%. And the cost of EV came down by 50%. If countries can engineer this kind of reduction in cost, you don't need government subsidies. But these green goods and services become competitive by themselves. They compete away the fossil fuel powered alternatives. This is, I think, should be the real focus of, you know, government and industrial policy rather than, you know, competing for limited fiscal resources for subsidy.
00:32:13
Speaker 2: We saw in some of the numbers that even in the U.S. where we are seeing probably the clearest step back on climate policy, you know, renewable investments go down a little bit over the next few years, but then they rise up again. Sort of speaking to your point about technology, because the cost makes the difference. But then you look at.
00:32:31
Speaker 1: That versus what is needed.
00:32:33
Speaker 2: We are living through an El Nino year right now, getting us a flavor of what global warming will look like in five or 10 years' time. This year will be the hottest year, and then next year is likely to break that record again because El Nino is going to continue. In the face of what we are seeing in rising impacts, are there ways in which finance can come to help on adaptation, for example? There was a typhoon recently here in the southwest of China. There was massive heat waves where I was in Europe over the summer, five or six of them continuously. And, you know, we don't have air conditioning like you guys have here in Hong Kong. Are there ways in which finance can help adaptation?
00:33:14
Speaker 1: Yeah. Now, let me talk about the two sort of climate resilience issues. One is the heat wave you're talking about. The other one is water shortage issues. And we can address it by very cheap energy here. Cheap solar energy, yeah. And the Chinese solar power, if you deploy properly, in fact, in one of the pilots, my institute has done, within my institute, we generate power at about 30 cents RMB per kilowatt, which is about four cents US dollar, yeah. It's five times in probably European price. If it's so cheap, everybody has air conditioning, right? If it's too expensive, you cannot afford it. So make it cheaper, which is technology available, just a matter of deployment. So I think heatwave is another problem here. As long as you can arrange the cheaper power that's being deployed in every corner of the country. Water, as I said, we've got a lot of water technology, especially in the portfolio that we are proposing to promote in the Green Accelerator, at least 10 technologies. for example the water saving technology for agriculture which is called smart irrigation reduces use of water 30-40% at the same time increasing crop yields by 20% and also the what they call rain enhancement technology basically in the place you know that's close to a desert you can shoot sound wave to the sky and it rains within 30 minutes and climate resilient seeds which mean that you can plant the new seeds that could be rice or wheat that reduces use of water by 30, 40% as well. So there are many, many technologies available. Just deploy them. It will address a large part of the other drought problem.
00:34:57
Speaker 2: If I'm taking one big message from our discussion is that you started as a macroeconomist and you focused on green finance. But so much of what you talk about now is how to enable finance to really unlock technology deployment because the technologies that have been developed is really the deployment of these technologies that is uneven and that needs to be sped up.
00:35:19
Speaker 1: In different parts of the world.
00:35:21
Speaker 2: Do your colleagues in finance see it the same way or are you evangelizing at a place where others aren't seeing it?
00:35:27
Speaker 1: Yeah, this is exactly what I told a lot of bankers last night at the HLBC event here. I see most of the bankers, they're sitting there waiting for the technology companies to come to them, waiting for the bankable projects to come to them. But what we need now is we go out and create a bankable projects. And this requires the bankers to know technology and understand what are the new technology that can reduce the cost of the services and production so that we can assemble these projects. And the real problem in global especially the global south system of finance market is that they don't lack money but they lack bankable projects in fact i quoted a number yesterday saying that 90 percent of the green project proposed to the local banks in the emerging market are being rejected which means that we need a lot of service a lot of help making these projects more bankable especially using the appropriate technology thank you majun thank you very much.
00:36:35
Speaker 2: And thank you for listening to Xero. This episode was recorded live at Hong Kong Green Week. Now for the sound of the week. That's not the sound of a chainsaw chopping through a tree. That's the sound of a lyrebird, an incredible natural mimic that lives in Australia. If you liked this episode, please take a moment to rate and review the show on Apple Podcasts, YouTube and Spotify. This episode was produced by Oscar Boyd. Special thanks to the team at Bloomberg NEF and also to Samar Saadi, Ishika Mukherjee and Alyssa McDonald. I'm Akshat Rati, back soon.
