Hong Kong has successfully priced USD$2.5 billion of green bonds under its Government Green Bond Programme, more than double the size of its first green bond in 2019, tapping into rising demand for socially responsible debt to help the city meet its environmental goals.
The offering comprises three portions of $1 billion 5-year, $1 billion 10-year and $500 million 30-year green bonds. The 30-year option is also the first such green bond to be issued by an Asian government, and the longest tenor to be issued by the Hong Kong government.
According to the Hong Kong Monetary Authority (HKMA), which is acting as the Hong Kong government’s representative in the green bond offerings, a virtual roadshow on January 25 saw strong demand from global investors, with the 5-year and 10-year option each attracting more than five times their respective issuance sizes, and the 30-year option attracting orders more than seven times its issuance size. There was particularly strong demand from Asian institutional investors, resulting in the overall allocation of 65% of the total issuance size to this group. European and US investors, who expressed stronger interest for the longer-tenor bonds, received 20% and 15% allocations respectively.
By investor type, 34% of the Green Bonds were distributed to banks, 46% to fund managers, private banks and insurance companies and 20% to central banks, sovereign wealth funds and supranationals.
Financial Secretary, Paul Chan says, “The success of the offering demonstrates investor confidence in Hong Kong’s credit strengths and economic fundamentals in the long term. The issuance will help catalyse further growth of the green and sustainable bond market, particularly leveraging on Hong Kong’s strengths as a leading green finance hub in the region.”
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The government published its Green Bond Framework in 2019, setting out how green bond proceeds will be used to finance projects that will improve the environment and facilitate the transition to a low-carbon economy. Hong Kong recently pledged to become carbon neutral by 2050. Almost three years ago, the government said that it would look to issue up to $12.9 billion in green bonds as part of its efforts to become an international green finance centre.
Proceeds raised under the Government Green Bond Programme will be credited to the Capital Works Reserve Fund to finance or refinance public works projects that support the sustainable development of Hong Kong.
The green bonds are being issued under the newly-established Global Medium Term Note Programme, which Chan says is the world’s first such program dedicated to green bond issuances.
The green bonds are expected to be settled on 2 February 2021 and listed on the Hong Kong and London stock exchange.