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

PUBLISHED : Thursday, 19 October, 2017, 9:12pm
UPDATED : Tuesday, 03 July, 2018, 5:31pm

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.

A spokesman at the Hong Kong Stock Exchange said that the bourse is “open to exploring any innovative financial initiative that comes to our attention,” although the Mandatory Provident Fund Schemes Authority said they did not have plans to issue bonds in the foreseeable future.

So far, there have been three green public green bonds issued in Hong Kong through the city’s subway operator MTR, Link Reit and Xinjiang Goldwind.

“If more environmental measures are taken in the construction of government buildings, public housing and home ownership schemes, then the impact will be huge,” said Stephen Wong, deputy executive director and head of public policy institute at Our Hong Kong Foundation said.

With additional reporting by Peggy Sito in Hong Kong.