Hong Kong Completed Largest Green Bond Issuance
At the beginning of 2023, Hong Kong issued the largest green bond in history, totaling ＄5.8 billion. The green bonds obtained more than ＄25 billion of subscription, involving three currencies, namely, US dollars, euros and offshore RMB. The issuing period is between 2 years and 30 years. The yield of fixed rate bonds is 3% for 2-year bonds and 3.3% for 5-year bonds.
As important financing tools in ESG aspect, all economies have accelerated the issuance of financial products such as ESG funds and green bonds in recent years. This article will briefly introduce Hong Kong’s green bond program for readers’ reference.
Hong Kong’s Green Bond Program
In 2018, Hong Kong launched the government green bond program for the first time, with an initial borrowing ceiling of HK $100 billion (about $12.8 billion). This borrowing limit was increased to HK $200 billion ($25.6 billion) in 2021. The funds raised by green bonds are mainly used for the environmental aspects of ESG, providing funds for some environmental related projects. At the same time, Hong Kong has established a green bond steering committee to provide guidance for the launch and development of the green bond program.
In the “2030 Climate Action Blueprint” released in 2017, Hong Kong said that it would try to reduce carbon emissions by 65% to 70% in 2005 by 2030 and achieve carbon neutrality by 2050. The “2050 Climate Action Blueprint” released in 2021 proposes to reduce carbon emissions by half in 2005 by 2035.
Hong Kong’s Green Bond Framework
After launching the green bond program in 2018, Hong Kong launched the green bond framework in 2019, which describes how to issue green bonds and the use of raised funds. After the ceiling of green bond borrowing was raised in 2021, Hong Kong launched the second green bond framework in 2022. The green bonds issued after 2022 are applicable to the new framework.
The second version of the green bond framework in 2022 requires that the raised funds can only be used for the financing or refinancing of green projects, and the projects need to meet one or more of the following categories of environmental protection:
- Renewable energy;
- Energy efficiency and energy conservation;
- Pollution prevention and control;
- Waste management and resource recovery;
- Water and wastewater management;
- Nature conservation and biodiversity;
- Clean transportation;
- Green buildings;
- Adaptation to climate change;
Previously Issued Green Bonds in Hong Kong
Before the issuance of green bonds in 2023, Hong Kong has issued green bonds for four times:
In May 2019, the first batch of green bonds was issued, with a total scale of ＄1 billion;
In February 2021, the second batch of green bonds was issued, with a total scale of ＄2.5 billion；
In November 2021, the third batch of green bonds was issued, and the euro green bonds and onshore RMB green bonds were issued for the first time, with a total scale of 1 billion dollars, 1.75 billion euros and 5 billion yuan;
In May 2022, the fourth batch of green bonds was issued. This issue is aimed at retail investors, with fixed coupon no less than 2.5% and a total size of 20 billion Hong Kong dollars (2.6 billion US dollars), making it the largest green retail bond issue in the world;
The green bonds issued in January 2023 are the fifth batch of green bonds for institutional investors. Previously, Hong Kong had issued about US $10 billion of green bonds ($7.3 billion for institutional green bonds and $2.6 billion for green retail bonds). This $5.8 billion issued this time accounted for more than half of the total issuance in the past three years.
Reference:
Hong Kong Government Green Bond Programme – Overview (hkgb.gov.hk)
