SINGAPORE - Hong Kong and Singapore have long squared off to be the preeminent finance hub for Asia. That battleground is now shifting to the ESG space, with potentially trillions of dollars at stake.

From green bonds to carbon trading and asset management, both cities are angling to be the regional base for sustainable finance as governments and companies ramp up investments to fight climate change. Combined ESG (environmental, social, and governance) assets could soar to US$53 trillion (S$72 trillion) by 2025, with Asia sparking the next leg of growth, according to Bloomberg Intelligence.

The race to attract all that fresh money and trading business in Asia will take years to play out, but so far Singapore has an early edge over Hong Kong.

“Singapore knows that it might not be as established as Hong Kong as a financial hub, but in this area, if it manages to win, it will really be a game changer,” said Cherie Tam, senior manager in Hong Kong at Blunomy, a climate consulting firm.

As more firms look to expand ESG financing in Asia, here’s how the competition for environmental, social and governance business is shaping up.

Green Finance (EDGE: Singapore)

There were 272 sustainability, green, social or transition bonds listed in Singapore as of Sept 28, more than double the 103 listed in Hong Kong. Issuance linked to Hong Kong’s exchange totaled US$24 billion, versus Singapore’s US$34 billion. Singapore firms also hold an edge for green loans, with about US$39.5 billion, nearly triple the US$13.4 billion raised in Hong Kong.

As an issuer though, Hong Kong is well ahead, selling US$7.2 billion in sovereign green bonds across different currencies since 2019 to establish a benchmark for corporate borrowers. Singapore only entered the green bond market in August with its debut sale of US$1.7 billion in 50-year notes.

Hong Kong’s early adoption of a taxonomy that finds common ground between Europe and China will help the market grow, according to Elsa Pau, founder of BlueOnion., an ESG financial analytics firm. “Investors’ demand is still growing for a sustainable ecos...