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19b euros green bonds in the pipeline

Hong Kong Chief Executive Carrie Lam Cheng Yuet-ngor delivers a speech at the EU and Hong Kong: The Green Way forum in Hong Kong on Sept 16, 2021. (PHOTO / HKSAR GOVERNMENT)

Hong Kong could issue more than 19 billion euros worth of green bonds over the next few years in its endeavors to take the lead in green finance.

Chief Executive Carrie Lam Cheng Yuet-ngor told the “Green Way” forum hosted by the European Union on Thursday that the city is committed to becoming a global leader in green finance.

The forum was organized by the European Union Office to Hong Kong and Macao and the European Chamber of Commerce in Hong Kong. EU office head, Thomas Gnocchi, and Frederik Gollob, chairman of the European Chamber of Commerce in Hong Kong, joined the forum.

Lam said that it helps that the Guangdong-Hong Kong-Macao Greater Bay Area Outline Development Plan supports Hong Kong’s development as the region’s green finance center.

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The Green and Sustainable Finance Cross-Agency Steering Group, chaired by the Hong Kong Monetary Authority and the Securities and Futures Commission, was set up last year, she said.

“The goal is to accelerate the growth of green and sustainable finance in Hong Kong and support the government’s climate strategies.”

In July, the steering group said Hong Kong can play a strategic role as China’s gateway and mobilizer of capital to facilitate the national carbon neutrality goal. The group also launched the Centre for Green and Sustainable Finance to help the financial industry manage risks and capture opportunities arising from climate change.

Hong Kong’s maiden green bond, a US$1 billion bond with a five-year tenor, was issued in May, 2019. The bond drew orders more than four times its size. The issuance was included in four major green bond indices, Bloomberg MSCI Barclays Green Bond Index, the BAML Green Bond Index, the S&P Green Bond Index and the Solactive Green Bond Index.

To enable Hong Kong to go further, we have already got Legislative Council’s approval to double the borrowing ceiling of the Green Bond Program to about 22 billion euros.

Carrie Lam, HKSAR’s chief executive 

To date, through two offerings, Hong Kong has launched US$3.5 billion green bonds.

ALSO READ: HKSAR govt issues US$2.5 billion green bonds

“In both, no less than 20 percent of the bonds were allocated to European investors. This is a ringing endorsement of European investor confidence in Hong Kong’s credit strengths and economic fundamentals. It also illustrates our shared commitment to promoting sustainable development and combating climate change. To enable Hong Kong to go further, we have already got LegCo’s approval to double the borrowing ceiling of the Green Bond Program to about 22 billion euros. That should allow the issuance of green bonds worth more than 19 billion euros over the next few years,” Lam told the forum.

The Green Bond Program, set up in 2018, helps promote greater liquidity for the green bond market in Hong Kong. In 2019, US$10 billion of green bonds were arranged and issued.

In February, the government issued US$2.5 billion of green bonds, made up of 5-year, 10-year and 30-year tranches, under a Global Medium Term Note Program. It was world’s largest US dollar government green bond. The bonds were priced at 0.635 percent (22.5 basis points over 5-year US Treasuries) for the 5-year tranche; 1.414 percent (37.5 bp over 10-year US Treasuries) for the 10-year tranche; and 2.431 percent (62.5 bp over 30-year US Treasuries) for the 30-year tranche.

European investors were allocated 20 percent of the total issuance and US investors received 15 percent, Hong Kong Monetary Authority data show. 

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