The ESG Phenomenon: Hong Kong's New Green Bond Programme

Editorial Staff

16 February 2022

Hong Kong’s government has launched an HK$6 billion ($770 million) retail green bonds programme into which residents can sign up in denominations of HK$10,000.

The bonds, which have a three-year maturity, will pay holders interest once every six months, linked to Hong Kong’s inflation rate, subject to a minimum rate of 2 per cent, the government said.

“Residents can directly contribute to greening Hong Kong and share the fruit of the sustainable development of Hong Kong through participating in the green and sustainable finance market,” Financial Secretary Paul Chan said.

Green bonds have become popular in a number of jurisdictions, as public and private entities see them as ways to tap enthusiasm for environment-linked finance, providing governments with often relatively cheap funding. The phenomenon has led to new terms such as “greenium” – the premium such debt can command versus conventional debt due to strong demand. Whether that premium can withstand a period of prolonged inflation and rising interest rates remains to be seen.

In the Hong Kong bond initiative, the proceeds of the Government Green Bond Programme will be credited to the Capital Works Reserve Fund to finance or refinance green projects with environmental benefits, the government said (source: www.news.gov.hk).

The subscription period will start from 1 March to 11 March. Hong Kong residents may apply through a placing bank, a securities broker or the Hong Kong Securities Clearing Company.

HSBC is a co-arranger and placing bank for the bonds.