Regulator to set benchmark for companies to issue green bonds in Hong Kong

Hong Kong’s monetary authority is working with the government to issue green bonds in the city in the next financial year, setting a benchmark for companies to issue debt to fund environment-related projects.

The move is part of the plan outlined last week by Chief Executive Carrie Lam Cheng Yuet-ngor for the government to take the lead in establishing a fixed income market in the city. The government is working with the Chinese government in the development of green financing.

“This is a new concept, even some international ratings agencies have just started developing it. There is room for Hong Kong,” said James Lau, Secretary for Financial Services and the Treasury, adding that the city can play a role in establishing a qualifying green bond scheme by recognising qualified parties for external review.

The issuance of a green bond by the Hong Kong Monetary Authority (HKMA) will actively promote China’s Belt & Road initiative, which is also in line with the aim of attracting international investors to fund green projects through the city’s capital markets, a HKMA spokesperson said.

Our Hong Kong Foundation, a public policy think-tank set up in 2014 by the city’s first Chief Executive Tung Chee-hwa, said the government should introduce a Qualifying Green Bond scheme that can verify green bonds that comply with well-recognised standards such as the Climate Bond Standard and China’s Green Bond Endorsed Project Catalogue.

At the same time, proceeds from potential sovereign green issues that come under this scheme can also be used for the financing of upcoming public housing projects that will require HK$117.8 billion (US$15.1 billion) in the coming decade, the foundation said.