In this Dec 20, 2012 photo, a woman walks beneath signage for the Hong Kong Monetary Authority (HKMA). The HKMA said on July 31, 2017 that total assets of the city’s exchange fund reached about US$499.9 billion at the end of June, HK$97.5 billion more than the total at the end of May. (DALE DE LA REY / AFP)
HONG KONG – The Hong Kong Monetary Authority is set to issue green bonds as soon as the Legislative Council passes the necessary resolution, with the target date within this fiscal year.
The city’s de facto central bank said it had already appointed an adviser to supervise the issuing of green bonds.
It helps to show the government’s commitment to promote Hong Kong sustainable economic development, and it also helps attracting local and overseas issuers to come to Hong Kong to issue green bonds.
Vincent Lee Wing-shing, Executive Director (External), Hong Kong Monetary Authority
The HKMA’s decision to issue green bonds makes two important statements, HKMA Executive Director (External) Vincent Lee Wing-shing said at the press conference announcing the move.
“It helps to show the government’s commitment to promote Hong Kong sustainable economic development, and it also helps attracting local and overseas issuers to come to Hong Kong to issue green bonds.”
At least 16 green bonds have been issued in Hong Kong to date with an aggregate issue size of about HK$53 billion (US$6.8 billion), HKMA said. Besides local and mainland issuers such as MTR Corp, Link REIT, Swire Properties, Xinjiang Goldwind Technology and China Development Bank, multinational development banks such as the Asian Development Bank, European Investment Bank and World Bank also issuedgreen bondsin the city.
In the 2018-19 Budget announced in February, the administration announced a borrowing ceiling of HK$100 billion to tap the green-bond market; proceeds will be credited to the Capital Works Reserve Fund to fund green public-works projects.
HKMA will also launch a three-year pilot grant scheme to lure local, Chinese mainland and international enterprises to issue bonds in Hong Kong. First-time issuers can apply for a subsidy for two issuances at most and capped at HK$2.5 million, halving issuance expenses. HKMA will announce subsidy scheme details in May.
Green bond issuers use the proceeds for projects that have a clear environmental benefit such as renewable energy, energy efficiency or climate-change adaptation. Green bond issuers pay coupon interests in the same way as conventional-bond issuers.
Martin Scheck, chief executive of the International Capital Market Association (ICMA),a self-regulatory organization and trade association for capital-market participants, said it is difficult to assess when a green-bond market is mature based on the volume of bonds issued.
“I do not think there is hard and fast answer to determine how much the government has to issue in its green-bond program in order to make it creditable. What is creditable is the government is stepping up, announcing the signaling message to green-bond issuers that they should consider Hong Kong as other financial centers,” Scheck reckoned.
Hong Kong is a relative newcomer in the global green-bond market but the HKMA is confident the local market will grow.
“The central government is encouraging the development of green finance and green bonds. In addition, mainland companies also benefit in issuing green bonds in Hong Kong either because the issuers need US dollars to finance their offshore investments through issuing dim-sum green bonds, or they want to raise their international profile. Hong Kong is a deep capital market to do it,” Lee noted.
The global green-bond market grew 78 percent to US$156 billion last year, ICMA said. In the first quarter this year, global green-bond issuance amounted to US$29.6 billion compared with US$27.9 billion a year earlier.
Bank of America Merrill Lynch, one of the leaders in green-bond underwriting, estimated green-bond issuance could reach as much as US$160 billion this year in a bull-case scenario.
“It is clear the green-bond market is maturing in scale, scope and breadth in Asia Pacific,” said Conan Tam, co-head of BoAML’s Asia-Pacific Debt Solutions. “Many of our clients are expanding their renewable-energy assets and investors are more keenly focused on their environmental, social and governance (ESG) portfolios.”