Climate change: Hong Kong’s government raises US$2.5 billion as it prices Asia’s first ever 30-year sovereign green bond

Hong Kong plans to issue up to US$12.9 billion in green bonds under programme announced nearly three years ago
Tuesday’s 30-year green bond represents the longest tenor debt ever offered by Hong Kong’s government

Green finance

Chad Bray

Published: 12:39pm, 27 Jan 2021

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Hong Kong’s government priced what it said was the first 30-year green bond by an Asian government ever and the longest tenor bond in its history on Tuesday, raising US$2.5 billion, according to the Hong Kong Monetary Authority (HKMA), the city’s de facto central bank.

The offering was more than double the size of the government's first US$1 billion green bond in 2019. The city’s government announced nearly three years ago that it would seek to issue up to HK$100 billion (US$12.9 billion) in green bonds as it strives to become an international green finance centre.

“The success of the offering demonstrates investor confidence in Hong Kong’s credit strengths and economic fundamentals in the long term,” Financial Secretary Paul Chan Mo-po said in a news release. “The issuance will help catalyse further growth of the green and sustainable bond market, particularly leveraging on Hong Kong’s strengths as a leading green finance hub in the region.”

Green bonds are fixed-income products designed to fund projects that are environmentally friendly.

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The announcement came as the Airport Authority Hong Kong was marketing its own 10-year and 30-year US dollar-denominated debt on Wednesday, marking the second time it has come to the market since issuing US$1.5 billion in senior perpetual capital securities in December.

Proceeds from the 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 the sustainable development of Hong Kong.

The green bond offering comprised a US$1 billion five-year tranche, a US$1 billion 10-year tranche and a US$500 million 30-year tranche. The bonds are expected to be settled on February 2 and be listed on the Hong Kong and London stock exchanges.

The pricing attracted strong interest, with investors making more than US$15 billion of pledges within hours of the books opening, according to a person familiar with the matter.

Financial Secretary Paul Chan said the city’s latest green bond issuance will help catalyse further grow Hong Kong’s green financing market. Photo: Handout

The five-year and 10-year tranches attracted orders more than five times their respective issuance sizes, while the 30-year tranche attracted orders more than seven times the issuance size, according to the HKMA.

About 65 per cent of the overall allocation went to Asian institutional investors, reflecting the appetite for green financial products in Asia, according to the HKMA. About 20 per cent went to European investors and 15 per cent to US investors, with a strong preference by Western investors for longer tenor bonds.

Banks received 34 per cent of the allocation, with 46 per cent going to fund managers and 20 per cent to central banks, sovereign nationals and others, the HKMA said.

Credit Agricole and HSBC acted as joint global coordinators on the offering.

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