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Hong Kong’s first carbon-focused fund eyes investments in projects to improve China’s climate-change ratings

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  • Hong Kong and China Gas Co and IDG Capital are launching the city’s first known carbon-focused fund targeting opportunities in mainland China
  • China’s net-zero goal will induce US$20 trillion of investments, according to Tsinghua University

Hong Kong and China Gas Company, the city’s sole piped-gas supplier, plans to raise up to 10 billion yuan (US$1.6 billion) with a partner for a new fund focusing on decarbonisation projects as China bolsters its ambitions of getting greenhouse emissions under control.

The IDG Towngas Clean Energy Fund will become the first known of its kind by a Hong Kong blue-chip company as China, the world’s top carbon dioxide emitter, steps up efforts to meet its carbon neutrality goal by 2060. Its partner IDG Capital is a venture capital firm focused on Chinese businesses.

“There is a massive opportunity in this business amid China’s carbon-neutrality pledge,” deputy managing director Peter Wong Wai-yee said in an interview with the South China Morning Post. Charging stations for electric vehicles, green technology start-ups and energy storage systems are among its areas of interest.

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The Hong Kong and China Gas Company, whose history dates back to 1862, is the sole supplier of piped-cooking gas to households in Hong Kong. The firm is controlled by Henderson Land Development, a property firm founded by 93-year-old Lee Shau-kee, the city’s second richest tycoon.

China’s road to carbon neutrality could induce up to 130 trillion yuan of new investments, according to an estimate by Tsinghua University’s Institute for Climate Change and Sustainable Development. While the nation’s overall climate-change goals are deemed “highly insufficient” by the Climate Action Tracker, the government is ramping up its contribution in renewable sources of energy.

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China is the world largest hydro, wind, solar and nuclear power projects installer and pushing heavily into cleaner energy solutions like hydrogen. It has also dangled out incentives to spur the adoption of electric vehicles, making the nation the single biggest marketplace for makers to compete with Tesla.

The IDG Towngas Clean Energy Fund expects to raise 5 billion yuan, allowing the Hong Kong-listed gas supplier to extend its reach into the so-called smart energy business.

The first phase of fundraising is expected to close by the end of this month, according to Alan Chan, chief investment officer of the gas supplier. “We hope the size will ultimately go to 10 billion yuan over the longer term.”

The ultimate goal of the fund is to build a platform that attracts different partners to participate in the development of the renewable energy ecosystem, he added.

The city’s gas supplier is currently co-managed by the 93-year-old tycoon’s two sons Peter Lee Ka-kit and Martin Lee Ka-shing. Its foray into the “smart energy” business is via a subsidiary known as Towngas Smart Energy, which focuses on renewable energy such as solar-panel systems on rooftops.

© Provided by South China Morning Post Towngas CEO Peter Wong Wai-yee (left) and chief investment officer Alan Chan, at the company’s headquarters in North Point. Photo: Jonathan Wong

Towngas Smart Energy, chaired by Peter Lee, aims to develop 15 gigawatts of solar PV projects until 2025 to ready its capacity for the future. Its parent company has invested in mainland China since 1994 and Towngas Smart Energy aims to leverage its access to 40 million residential, commercial and industrial users there and convert them to solar energy from gas consumption. Among them, the company pays special focus on its 40,000 commercial and industrial companies.

In mainland China, the company signed agreements last year with more than 30 industrial parks to supply them with solar energy. The aim is to double its footprint in the area in 2022, and to 200 parks by 2025, Wong, who is also the CEO of Towngas Smart Energy, said in the interview.

China has about 2,600 national and provincial level industrial parks, accounting for 60 per cent of the country’s annual carbon emissions. They are projected to reduce their emissions levels by 28 per cent during a 20-year period to 2035, and by 51 per cent between 2035 and 2050, according to Tsinghua University.

Industrial parks have huge potential in helping China cut its carbon emissions, and will play a crucial role in terms of its contribution to limiting global warming to less than 2 degrees Celsius, the university said in its report published in 2020.

This is the “first part” of its business expansion in mainland China, according to Wong. In the long term, Towngas Smart Energy and its partners can expand their offerings from distributed energy systems to power storage, live monitoring services and smart-energy management systems through big data analysis.

Additional reporting by Yujie Xue

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This article originally appeared on the South China Morning Post (www.scmp.com), the leading news media reporting on China and Asia.

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