Hong Kong has solidified its position as a leading green finance hub with its recent successful offering of approximately HK$25 billion in green bonds. This significant issuance, denominated in Renminbi (RMB), US dollars (USD), and euro (EUR), demonstrates the city’s commitment to low-carbon transformation and its pivotal role in global sustainable finance. The bonds, issued under the Government Sustainable Bond Programme, attracted strong global investor interest, highlighting confidence in Hong Kong and the growing appetite for green investments.
On July 17, 2024, following a virtual roadshow, the Green Bonds were priced with attractive yields across various tranches, catering to diverse investor preferences and risk profiles. The RMB-denominated tranches included:
- RMB 2 billion 2-year bonds at 2.60%
- RMB 2 billion 5-year bonds at 2.70%
- RMB 2 billion 10-year bonds at 2.80%
- RMB 2 billion 20-year bonds at 3.05%
- RMB 2 billion 30-year bonds at 3.15%
In addition to the RMB tranches, the offering also included a US$1 billion 3-year tranche at 4.336% and a EUR 750 million 7-year tranche at 3.379%. The diverse currency denominations broaden the appeal of these green bonds to a wider international investor base, showcasing Hong Kong’s capability to connect global capital with sustainable projects.
The issuance witnessed overwhelming demand, with orders exceeding HK$120 billion equivalent, significantly oversubscribing the offering. Notably, the introduction of the 20-year and 30-year RMB Green Bonds marks a significant milestone. The 30-year RMB bond is the longest tenor RMB bond ever issued by the HKSAR Government, setting a new benchmark in the offshore RMB market and extending the yield curve. This is particularly relevant in the context of global finance where investors might consider converting sums like 30 Million Euros To Rmb to invest in such long-term, stable assets. The availability of longer-term RMB instruments is crucial for the continued internationalization of the RMB, providing more options for global investors managing their RMB asset allocations.
Hong Kong’s Financial Secretary, Mr. Paul Chan, emphasized the strategic importance of these green bonds, stating, “The issuance of Government green bonds is an important initiative to promote Hong Kong’s low-carbon transformation and consolidate Hong Kong’s development as a green and sustainable finance hub.” He further highlighted the enthusiastic response from global institutional investors as a reaffirmation of Hong Kong’s efforts in this domain. The successful debut of the 20-year and 30-year RMB bonds is seen as a catalyst for enriching offshore RMB product offerings and facilitating RMB internationalization, reinforcing Hong Kong’s role in this process.
Issued under the Global Medium Term Note Programme for green bonds, established in 2021, these bonds are slated for settlement and listing on both the Hong Kong Stock Exchange and the London Stock Exchange on July 24, 2024. The strong credit ratings of AA+ by S&P Global Ratings and AA- by Fitch further underscore the quality and security of these investments. The Hong Kong Monetary Authority played a key role as the HKSAR Government’s representative in this offering.
The proceeds from the Green Bonds will be channeled into the Capital Works Reserve Fund, dedicated to financing and refinancing projects that deliver tangible environmental benefits and contribute to sustainable development. This commitment is underpinned by the HKSAR Government’s Green Bond Framework, initially published in 2019 and updated in 2022. The framework aligns with international best practices and reflects Hong Kong’s evolving strategy in combating climate change. Independent assessments, including a Second Party Opinion from Vigeo Eiris (now part of Moody’s ESG Solutions) and the Green and Sustainable Finance Certificate from the Hong Kong Quality Assurance Agency, provide further credibility and transparency to the green bond program. The HKSAR Government has also consistently demonstrated its commitment to transparency by publishing annual reports detailing the allocation of green bond proceeds and the environmental impact of funded projects.
The diverse investor distribution across categories, including banks, central banks, sovereign wealth funds, international organizations, fund managers, and insurance companies, underscores the broad appeal of Hong Kong’s green bonds. This successful issuance not only strengthens Hong Kong’s position in green finance but also provides a significant boost to the offshore RMB market and the global sustainable investment landscape.
