Hong Kong raises US$1b in oversubscribed first green bond

Half of investors that placed orders came from Asia and nearly a third from Europe.

Reuters reports that Hong Kong has sold a five-year US dollar-denominated green bond with a coupon of 2.5% which attracted over US$4b in orders from global investors, as the city seeks to establish itself as a green finance centre.

Issued under under the city's $100b green bond programme, the bond proceeds will be earmarked for investment in environmentally friendly projects such as clean transportation, air quality and improvement and green buildings.

Also read: Government launches Green Bond Grant Scheme

“The favorable response from global investors indicates not only their recognition of Hong Kong’s credit strength, but also their support of Hong Kong’s determination and efforts in promoting sustainable development and combating climate change,” Paul Chan, Financial Secretary was quoted in the Reuters report.

Asia accounted for US$12b of the corporate green bonds and US$2.6b of the sovereign paper, the data showed.

Over 100 global institutional investors placed orders for Hong Kong’s green bond, with 50% going to Asia, 27% to Europe and 23% to the United States. Sovereign wealth funds, supranationals and central banks took up the biggest share of the bond at 41%.

"With the further development of green economy and industry in the Greater Bay Area, we expect more green bonds will be issued by Mainland China in HK. This will pave way to deepen the development of HK’s green bond market," Tommy Xie, Vice President, Head of Greater China Research at OCBC said in a report.

In 2018, issuance of green bonds in HK amounted to about US$11b whilst that in Mainland China totaled US$31.2b (up about 33% from 2017 and ranked the second in the globe), data from OCBC Treasury Research show. China’s investment in green projects is estimated to be over US$1.5t for the 13th five-year period. Chinese government may support about 15% of the required funds. This indicates that the other 85% of the funds required for green projects needs to be raised in the capital market.

Here's more from Reuters:

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