Background of the Green and Sustainable Finance Grant Scheme
In May 2021, Hong Kong launched the “Green and Sustainable Finance Grant Scheme (GSF)” to provide funds for issuers of green bonds and borrowers of green loans to promote the development of green and sustainable finance. This plan is integrated from the “bond funding pilot plan” and the “green bond funding plan”. The new plan will be implemented for three years and has been in operation for more than half of the time by 2023. The green bonds here is related to bonds issued by companies, not green bonds issued by government.
Requirements of Green and Sustainable Finance Grant Scheme
The green and sustainable finance grant scheme is divided into two types of subsidies, one is the subsidy for bond issuance costs, and the other is the subsidy for green certification costs. Specifically, the first subsidy is related to green bonds, and the second subsidy is related to green bonds and green loans.
In the first type of subsidy, the requirements are:
- First issuance of green bonds (if no green bonds are issued in Hong Kong within five years, it can be regarded as the first issuance);
- The bonds have been subject to external review and the issuance amount has reached at least HKD $1.5 billion;
- The bonds are issued in Hong Kong and are managed by the Central Debt Clearing System or listed on the Hong Kong Stock Exchange;
- The bonds are issued to no less than 10 people, or there is no relevant person of the issuer when there are less than 10 people;
- Issuers can only apply for subsidies for up to two bonds;
In the second type of subsidy, for green bond issuers the requirements are:
- Either the first application or the second application;
- The bonds have been subject to external review and the issuance amount has reached at least HKD $100 million;
- Bonds are issued in Hong Kong (at least half of the investment banks serving the bond issuance service are recognized by the Hong Kong Monetary Authority), and are managed by the Central Debt Clearing System or listed on the Hong Kong Stock Exchange;
- The bonds are issued to no less than 10 people, or there is no relevant person of the issuer when there are less than 10 people;
In the second type of subsidy, for green loan borrowers the requirements are:
- Either the first application or the second application;
- The loan has been reviewed externally and the loan amount has reached at least HKD $100 million;
- The loan is approved in Hong Kong (at least half of the funds are from Hong Kong);
Subsidies for Green and Sustainable Finance Grant Scheme
In the first type of subsidy, the bond issuer can get half of the eligible fee, but the upper limit of each subsidy is HKD $2.5 million. In the second type of subsidy, the bond issuer or loan borrower can get all the subsidy of eligible fees, but the upper limit of each subsidy is HKD $800000. Eligible fees mainly refer to:
- Intermediary fees and listing fees of financial institutions for bond issuance;
- Expenses for bond custody and settlement;
- Fees for green certification of bonds and loans;
Green Certification in GSF Grant Scheme
The Hong Kong Monetary Authority decides whether the evaluation institution is qualified to participate in the certification of green bonds and green loans according to the following conditions:
- The business scale of the evaluation institution in Hong Kong;
- Evaluation criteria of the evaluation institution;
- Past certification service of green bonds and green loans;
Now HKMA has released a list of recognized green certification institutions for GSF Grant Scheme on its website. HKMA says it will update the list irregularly.
Reference:
Hong Kong Monetary Authority – Tax Concessions and Incentive Schemes (hkma.gov.hk)
