The HKSAR Government Successfully Issues HK$25 Billion in Green Bonds
The Government of the Hong Kong Special Administrative Region of the People’s Republic of China (HKSAR Government) has recently completed the issuance of around HK$25 billion in green bonds, as reported by the Hong Kong Monetary Authority. The green bonds, denominated in Renminbi (RMB), US dollars (USD), and euro (EUR), were issued under the Government Sustainable Bond Programme.
Details of the Bond Offering
The green bonds were priced on July 17, 2024, following a virtual roadshow held on July 16, 2024. The issuance included various tranches with different terms:
- RMB 2 billion 2-year tranche at 2.60%;
- RMB 2 billion 5-year tranche at 2.70%;
- RMB 2 billion 10-year tranche at 2.80%;
- RMB 2 billion 20-year tranche at 3.05%;
- RMB 2 billion 30-year tranche at 3.15%;
- US$1 billion 3-year tranche at 4.336%; and
- EUR 750 million 7-year tranche at 3.379%.
The offering received substantial interest from global investors, resulting in orders equivalent to more than HK$120 billion. Notably, the 20-year and 30-year RMB green bonds marked the first issuance of their kind, with the 30-year bond being the longest tenor RMB bond ever issued by the HKSAR Government.
Impact on the Market and Government Statements
The Financial Secretary, Paul Chan, emphasized the significance of the green bond issuance in advancing Hong Kong’s shift towards a low-carbon economy and reinforcing its role as a green finance hub. Chan highlighted the importance of the initiative in promoting sustainable development and attracting global investors to subscribe to Green Bonds.
The bonds are set to be settled on July 24, 2024, and will be listed on the Hong Kong Stock Exchange and the London Stock Exchange. S&P Global Ratings assigned a credit rating of AA+ to the bonds, while Fitch rated them as AA-.
Utilization of Proceeds and Framework
The proceeds from the green bonds will be directed towards the Capital Works Reserve Fund, which supports projects with environmental benefits and contributes to sustainable development. The HKSAR Government’s Green Bond Framework, initially introduced in March 2019 and updated in February 2022, outlines the utilization of funds for projects that promote a low-carbon economy and comply with international standards.
The framework has received a positive assessment from Vigeo Eiris, part of Moody’s ESG Solutions, aligning with responsible investment principles.
Investor Distribution Breakdown
The distribution of investors across different categories is as follows:
| Category | RMB Green Bonds | USD Green Bonds | EUR Green Bonds |
|---|---|---|---|
| Banks | 71% | 57% | 48% |
| Central banks, sovereign wealth funds, and international organizations | 13% | 22% | 14% |
| Fund managers, private banks, insurance companies, and others | 16% | 21% | 38% |
While the RMB and EUR green bonds were offered in Reg S format, the USD green bonds were presented in 144A/Reg S format.
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