HK Debuts Euro-Denominated Green Bond

A 20-year tranche issued under Green Bond Programme is the longest tenor euro-denominated bond issued by an Asian government to date.

The Hong Kong government has raised US$3 billion through the sale of green bonds denominated in US dollars and euro.

The offering comprised three tranches of US$1 billion 10-year, €1.25 billion 5-year, and €500 million 20-year offered under the government’s Green Bond Programme.

The 20-year tranche is the longest tenor euro-denominated green bond issued by an Asian government to date, as well as the Hong Kong government’s inaugural offering of euro-denominated bonds.

In January, the government issued US$2.5 billion of green bonds under the Green Bond Programme, the first ever 30-year green bond by an Asian government and the longest tenor bond in Hong Kong’s history.

The city plans to issue HK$175.5 billion in green bonds over the next five years as Hong Kong strives to become an international green financial centre. The government has gone to market with three green bonds since first announcing the programme in 2018.

According to the Hong Kong Monetary Authority (HKMA), the latest offering attracted strong interest from a diverse group of conventional and green investors. The dollar tranche attracted nearly three times more orders than its issuance size, while the 5-year and 20-year euro tranches attracted more than €2.2 billion in orders.

“The inaugural euro-denominated offering has also allowed us to reach out to a new group of investors, drawing their attention to the sustainability journey of and financial opportunities in Hong Kong, providing momentum for further growth of our financial market,” said Financial Secretary Paul Chan Mo-po said in a statement.

The euro tranches were dominated by European investors, with 73% distributed to European entities and 27% to Asian investors. Meanwhile, 72% of the dollar tranche was distributed to Asian investors, and the remaining 28% to European investors.

“We are pleased to see the strong demand for the HKSAR Government’s green bonds, underscoring investor confidence in our economic fundamentals as well as their support of our efforts in combating climate change and achieving carbon neutrality,” Chan said.

The green bonds are expected to be settled on 24 November 2021 and listed on HKEX (Hong Kong Stock Exchange) and the LSE (London Stock Exchange).

Hong Kong’s government published its Green Bond Framework in 2019, setting out how green bond proceeds would be used to fund projects that will improve the environment and facilitate the transition to a low carbon economy.

Proceeds from the latest green bond sale will go to the city’s Capital Works Reserve Fund to finance or refinance public works projects that provide environmental benefits and support sustainable development.

According to the SCMP, Hong Kong plans to also raise funds from the sale of renminbi-denominated green bonds, which will further consolidate the city’s role as the global offshore business hub for China’s currency.

Last month, the Shenzhen government become the first local government authority in China to issue RMB-denominated bonds in offshore markets, with a CNY5 billion dim sum bond issued in Hong Kong.

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