Insight

Across Asia, there is an increasing focus on mobilising capital to achieve the ambitious net-zero targets that the region needs.

Exchanges, and the carbon market ecosystems developing around them, have a vital role to play in this process.

Carbon markets allow companies to purchase carbon credits to complement their internal decarbonisation activities and drive capital towards climate projects, like reforestation and the development of green technologies.

These crucial channels have substantial growth prospects, with MSCI valuing the global carbon market at as much as US$35 billion by 2030. To achieve this scale in an efficient and transparent way, exchanges will become increasingly crucial facilitators.

At HKEX, we are building a sustainable finance ecosystem to accelerate funding for climate solutions and channel investment towards sustainable projects. Core Climate, our carbon marketplace for trading carbon credits, is part of this effort, connecting climate projects across Asia with global carbon investors.

Core Climate references IOSCO's '21 Good Practices' to support sound market structures and enhance the integrity of voluntary carbon markets (VCMs). The platform counts over 100 institutional clients as participants, including Cathay Pacific Airways, which settled 50,000 tonnes of voluntary carbon credits in December 2024.

But this is just the beginning and, as VCMs across Asia continue to evolve, we must now consider how exchanges such as HKEX can help unlock the potential of capital and carbon markets to accelerate the region’s transition to a sustainable, net-zero future.

We see eight ways in particular.

Asia will not offset its way out of the climate crisis. At HKEX, we encourage companies to prioritise direct emissions reductions. Carbon credits are a supplementary tool to take responsibility for hard-to-abate emissions, while work continues to reduce them at the source.

For instance, using Core Climate, China State Construction International purchased carbon credits to offset residual emissions in the O Park2 Construction Project in Hong Kong, making it the first carbon-neutral construction project in China.

The efficacy of climate projects, and the carbon credits they generate, varies greatly.

Mindful of this risk, Core Climate facilitates the trading of carbon credits generated by projects that are independently verified against internationally recognised standards, including Gold Standard’s Verified Emission Reductions and Verra’s Verified Carbon Standard.

We also encourage continued scrutiny of carbon projects and their verifying bodies, to promote trust in this critical lever for decarbonisation.

At HKEX, we support issuers to adhere to internationally recognised climate disclosure and reporting standards. Our Environmental, Social, and Governance (ESG) Reporting Code includes mandatory disclosure requirements that cover the use of carbon credits.

By developing disclosure and reporting requirements that consider carbon credit integrity and verification by third-party groups, we aim to promote consistency and transparency and encourage issuers to integrate ESG considerations into their strategies and operations.

Greater interoperability is essential for a unified, efficient, and liquid Asian carbon market. However, jurisdictional fragmentation has historically hindered cross-border carbon trading.

Core Climate is the only carbon marketplace to accept settlement in HKD and RMB. To advance cross-border carbon market connectivity, HKEX signed memorandums of understanding with two carbon markets in Mainland China, the Beijing Green Exchange and Shenzhen Green Exchange to share expertise and support cross-border trading, settlement and cooperation.

These efforts build on the 2022 launch of the Hong Kong International Carbon Market Council, which connects international and cross-sector stakeholders, including international and regional carbon market advocates, leading financial institutions and prominent corporations to bring together diverse perspectives, share insights, and help develop an international carbon market in Hong Kong.

Globally, over-the-counter (OTC) transactions have become the most common way to trade carbon credits, mainly because of the uniqueness of individual carbon projects.

But this practice inevitably creates market inefficiencies.

As a carbon marketplace, Core Climate provides a transparent and efficient platform for buying and selling carbon credits, reducing information asymmetry around carbon projects and prices.

Leveraging Delivery-vs-Payment settlement mechanisms for OTC trading, Core Climate also helps mitigate counterparty risk, fostering trust and efficiency, and benefiting both buyers and sellers.

To improve credit traceability and cross-border fungibility, we are open to leveraging technologies, including blockchain, to address existing carbon market issues.

Our Project Ensemble initiative, in partnership with the Hong Kong Monetary Authority, is testing the feasibility of a wholesale Central Bank Digital Currency for interbank settlement, and the tokenisation of real-world assets including carbon credits on a distributed ledger.

The climate crisis requires well-informed action across all regions and sectors. The International Carbon Markets Summit on April 15 is one way in which we are advancing the conversation around VCMs.

During an afternoon of round tables, fireside chats and keynotes, we will explore issues of regulatory alignment, market integrity, digital innovation, and regional cooperation.

Ongoing education and support for our issuer community is also available at HKEX ESG Academy. This resource helps organisations measure and manage their ESG risks and ensure the long-term sustainability of our markets. Our Net Zero Guide is designed to help companies develop their net-zero targets and engage with carbon markets through Core Climate.

A range of sustainable finance instruments, such as green bonds, ESG ETFs and carbon credits are available in Hong Kong to meet the market’s evolving needs. Among these, carbon credits are a critical lever for the net-zero transition.

As the global focus on sustainability intensifies and market demands continue to diversify, there is a growing recognition of the need for innovative instruments. While Core Climate currently focuses on carbon credits, we are exploring other potential products to expand the market ecosystem and provide more choice for market participants.

At HKEX, our mission is clear: to unlock the potential of capital markets to accelerate the region’s transition to a sustainable, net-zero future.

A thriving, transparent Asian carbon market is an essential driver of the change we all want to see, but carbon markets in the region are still at an infancy stage. To build the liquid and vibrant carbon markets that Asia needs, it is critical to have the appropriate integrity frameworks in place.

How we achieve consensus and build these frameworks will be top-of-mind at this week’s International Carbon Markets Summit, co-hosted by HKEX and the Securities and Futures Commission, where global policymakers, regulators, intermediaries, and green technology firms will come together to advance the orderly, high-integrity development of VCMs.

Anchored in IOSCO’s guidance, the Summit focuses on strengthening standards, transparency, and cross-border connectivity, while highlighting the critical role of digital innovation and sparking dialogue and action across the carbon ecosystem.

We recognise the crucial role capital markets must play in advancing the global sustainability agenda. And we look forward to working with all stakeholders here in Hong Kong, Asia and around the globe driving the net-zero transition and creating a sustainable, prosperous world for all.

To further explore the role of capital in unlocking a net-zero future, join us for the International Carbon Markets Summit or visit the online Core Climate hub.

HKEX’s Core Climate Provides Carbon Credits Settlement Services for Cathay Pacific Airways

HKEX Achieves Carbon Neutrality Goal in 2024

The Hong Kong International Carbon Market Council

Core Climate News Centre