Hong Kong marketing second green bond, key part of push to be Asia’s sustainable financing hub

Chad Bray
·3-min read

Hong Kong’s government began marketing its second US dollar-denominated green bond on Tuesday as the city seeks to bolster its status as an international centre for sustainable financing – a market that could top US$29 trillion globally over the next decade.

The city’s government first announced a programme in 2018 to issue up to HK$100 billion (US$12.9 billion) in green bonds, raising US$1 billion with its first bond under the programme in 2019.

Green bonds are fixed-income products designed to fund projects that are environmentally friendly.

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The latest offering priced 5-year, 10-year and 30-year bonds at about 25, 40 and 65 basis points respectively over US Treasuries, after tightening from 50, 60 and 90 basis-point spreads in initial guidance, according to marketing materials seen by the Post.

Within hours of the books opening, the bonds had attracted more than US$15 billion of pledges from investors, according to a person familiar with the matter. The bonds could be priced as soon as Tuesday.

Crédit Agricole and HSBC are acting as joint global coordinators, joint lead managers and joint bookrunners on the offering.

Demand for green financing is rising as China and other governments in Asia have pledged to reach carbon neutrality by 2060 and big investors push companies to become more environmentally friendly and disclose their efforts publicly.

The pricing comes as Hong Kong seeks to become a major green financing hub, particularly for development in the Greater Bay Area.

There were US$26 billion worth of green bonds issued in the city by the end of 2019, according to a November report by Hong Kong Institute for Monetary and Financial Research (HKIMR).

Eddie Yue (left), CEO of the Hong Kong Monetary Authority, and Ashley Alder (right), CEO of the Securities and Futures Commission, said in December that the city’s financial firms would be required to declare how their investments affect climate change beginning in 2025. Photo: Nora Tam
Eddie Yue (left), CEO of the Hong Kong Monetary Authority, and Ashley Alder (right), CEO of the Securities and Futures Commission, said in December that the city’s financial firms would be required to declare how their investments affect climate change beginning in 2025. Photo: Nora Tam

In May, seven financial regulators and government bureaus, led by the HKMA, formed a cross-agency body to promote the city’s efforts to become a green financing hub.

In August, the MTR Corporation, the city’s rail operator, sold a 10-year green bond worth US$1.2 billion, the biggest issued in the city at the time. Hong Kong’s government is its largest shareholder, holding 74.98 per cent of its outstanding shares as of December 31.

In November, the Hong Kong Monetary Authority (HKMA), the city’s de facto central bank, said it would team up with the International Finance Corporation (IFC) to help commercial banks address climate change as part of the new Alliance for Green Commercial Banks. The IFC estimates there are more than US$29 trillion in green and climate investment opportunities over the next decade.

Last month, a working group led by the HKMA and the Securities and Futures Commission said financial firms in the city would be required to declare how their assets and investments affect climate change beginning in 2025. Banks also will have to carry out stress tests to make sure their business models and investments could cope with events related to climate change beginning later this year.

Additional reporting by Alison Tudor-Ackroyd

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