Hong Kong’s Retail Green Bond receives enthusiastic response from small investors on first day of sale

·4-min read

Hong Kong investors rushed to subscribe to the inaugural Retail Green Bond on the first day of sale on Tuesday. The note, which offers individual investors bite-size chunks that promise to beat inflation, has set a milestone in the city’s plan to become a hub for environmentally conscious financial products.

Investors can subscribe to the three-year, 2.5 per cent bond in minimum lots of HK$10,000 (US$1,275) online from HSBC, Bank of China (Hong Kong) and a number of the city’s licensed banks until 2pm on May 6. An initial tranche of HK$15 billion has been earmarked, with the option to increase to HK$20 billion if there is demand.

Most banks involved in the offering said their first-day subscriptions were strong. HSBC, the biggest of the city’s three currency-issuing banks, saw “an encouraging response” with over 80 per cent of the subscriptions done online, according to a spokesman. Bank of China (Hong Kong) said it had received several thousand applications, with each subscription averaging HK$70,000.

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CMB Wing Lung Bank said applicants had subscribed to HK$210,000 worth of bonds on average, while the highest was HK$10 million. ICBC Asia saw subscriptions of HK$110,000 on average, with one application of HK$5 million.

Bright Smart Securities, one of the largest brokers in the city, said 8,500 investors had applied, with most subscriptions exceeding HK$50,000.

Green bonds are fixed-income financial products designed to fund environmentally friendly projects. The offering forms an important move to support Hong Kong’s plan to increase the use of wind, waste-to-energy projects and solar power to generate electricity to reach carbon neutrality by 2050.

“The issuance contributes to the government’s goal to develop Hong Kong as a regional green finance centre,” said Nneka Chike-Obi, director of Sustainable Fitch, the sustainable finance research unit of the credit ratings agency. “For this offering, retail banks and brokerages will be involved in green bond marketing for the first time, which expands the types of entities that will have experience with this product.”

Hong Kong’s Financial Secretary Paul Chan Mo-po (centre) during a 15 February 2022 press conference to announce the launch of the Retail Green Bond in Admiralty. Photo: Jonathan Wong
Hong Kong’s Financial Secretary Paul Chan Mo-po (centre) during a 15 February 2022 press conference to announce the launch of the Retail Green Bond in Admiralty. Photo: Jonathan Wong

The retail offering is about a third of the HK$56 billion of green bonds that Hong Kong’s government has already sold to institutional and professional investors.

Many banks and brokers are waiving their fees and throwing in other financial incentives to attract subscribers, doing their part to promote the concept of sustainable investment.

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HSBC said it would plant a tree in Indonesia for every allotment of green bond subscribed through its HSBC HK mobile app.

Interest will be paid every six months, based on the inflation rate over that half-year period, guaranteed at a minimum of 2.5 per cent, which is more generous than the minimum 2 per cent rate on similar inflation-linked bonds known as iBonds.

Both bonds would beat the inflation rate of 1.7 per cent in March and normal deposit rate of close to zero.

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This retail bond’s issuance is important for raising the general public’s awareness about the importance of green finance for Hong Kong’s climate actions, said Jeffrey Hung, CEO of Friends of the Earth (HK), a green group.

He said that a survey conducted in late 2020 by the group on 223 Hong Kong residents showed some 82 per cent were not aware of the term green finance.

The retail offer is an important step marking the maturing of Hong Kong’s green bond market, said Albert Lai, climate strategy leader at advisory firm Deloitte CarbonCare Asia.

“Not only will it increase the depth of the market, it can play a significant role in raising public awareness on the looming environmental challenges faced by Hong Kong,” he said.

The launch of the Retail Green Bond also marks the gradual return to normalcy of business and financing activities in Hong Kong, as the so-called fifth wave of Covid-19 outbreak subsides in the city. Banks reopened most of their branches this week, after shutting them for three months to prevent the spread of the highly transmissible Omicron strain.

The government’s initial plan of selling HK$6 billion of green bonds from March 1 was delayed as Covid-19 infections rose to the peak of over 50,000 new cases every day in early March. Daily new cases have since dropped to about 500 a day.

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