Impact investing makes a difference to MTR

23 May 2019

    In Hong Kong, 90 per cent of trips are made on public transport, which is amongst the highest in the world.1 The city already has one of the greenest transport systems globally.2

    As the territory evolves into a green finance and infrastructure hub, there's one company in railway operations that stands out when it comes to social, economic and environmental sustainability and that's the Mass Transit Railway or MTR. Every day, the MTR carries roughly 5.8 million passengers.3

    "The number of passengers that can be carried by one train is equal to 25 double decker buses or 1,500 cars. Our trains are powered by electricity, so they're more environmentally friendly, when compared to most other modes of transport," explains Herbert Hui, Finance Director at MTR Corporation.4 To date, the publicly traded company has raised USD1.4 billion in green bonds to support sustainable initiatives, including new rail lines and the conservation of wetlands. "We also have targets, in terms of energy reduction that we've set for our train operations, as well as our property businesses," states Mr Hui.

    This comes at a time when concerns about climate change, with associated risks to the environment and the economy are high on the global agenda. With an urgent need to move to a lower carbon economy, there is also increasing appetite to fund new initiatives. Already the green bond market hit USD167 billion in 2018 and is still growing.5

    "We need to help our clients with this transition. It is a strategic priority for HSBC, and we see global investments in the future actually turning to support this. MTR is recognised as a pioneer in using sustainable financing to achieve this move," explains Helen Wong, Chief Executive for Greater China at HSBC.

    In 2016, MTR became the first Asian rail corporation to issue a green bond with an external review. HSBC acted as the structuring advisor, USD600 million was raised with unprecedented demand for this initial green bond issuance.6 Then in 2018, HSBC helped the rail company arrange its very first green loan to the tune of USD300 million.

    "We have been able to raise green financing on very competitive pricing terms and we have also been able to reach dedicated green investors, thereby broadening our investor base. Green finance has also helped to enhance MTR's reputation," states Mr Hui.

    Sustainable financing is a shared goal for MTR and HSBC. The global bank is a founding member of Hong Kong Green Finance Association and is also part of the Green Loan Committee at the Asia Pacific Loan Market Association. "We want to be in the forefront of shaping industry standards and also to lead this dialogue," explains Ms Wong.

    With green financing comes a responsibility to show results through verified CO2 reductions or improved energy efficiency, in the case of MTR it used the monies for two new rail projects.

    "These lines are expected to reduce carbon dioxide emission by 42,000 tonnes a year.7 This is equivalent to planting about 1.8 million trees. We've also been investing in more energy efficient chillers for our stations. To neutralise the impact of railway infrastructure, we are also improving the ecology of Hong Kong's wetland, so that we can maintain the sustainability of migrating birds," details Mr Hui.

    MTR and HSBC's efforts in green infrastructure are also part of a bigger picture. The Organisation for Economic Co-operation and Development (OECD) estimates that globally USD6.9 trillion each year up to 2030 is needed in green, low-carbon and climate-resistant infrastructure.8

    "Regulators and governments are all now coming together in order to incentivise the market and stimulate this investment. If you look at the financial markets, there is also a good response, and Hong Kong is actually at the forefront of this," states Ms Wong.

    "The Hong Kong government has announced that they have set up a programme for issuance of green bonds to the tune of HKD100 billion. The money raised will be invested in environmentally friendly public works. We believe this is perhaps one of the biggest government programmes in the world." 9

    At the same time HSBC has committed USD100 billion globally to support sustainable financing up to 2025.

    When it comes to the future of green transport investments, the growth prospects for this sector also look strong. "Currently, 55 per cent of the world's population live in urban centres and this will increase to 68 per cent by 2050. So, electrified railways are expected to play an increasingly important role in moving populations en-masse in urban areas in an efficient, green and sustainable way," declares Mr Hui.10

    MTR also has plans for the future, it's looking to reduce electricity consumption by more than 20 per cent over a 12-year period to 2020.7 Using regenerative braking systems, which turns braking energy into electricity is part of the solution. It's also planning to transfer its green skillset to other destinations where it operates including mainland China, Australia, Sweden and the UK.

    "Breakthroughs in technology from sectors ranging from energy to transport will have to deliver a more sustainable future. Corporates like MTR are already at the cutting edge of this development. We've made sustainability a strategic priority, because we can see that in the future this is the direction of global investment," says Ms Wong.



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