Climate change: HSBC launches first yuan-denominated green certificate of deposit in Asia

Hong Kong retail customers can subscribe to new green finance product beginning on Monday
Offering comes as Hong Kong seeks to market itself as a centre for international green finance

Green finance

Chad Bray

Published: 5:15pm, 22 Feb 2021

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HSBC is offering Asia’s first yuan-denominated green certificate of deposit (CD) to retail customers in Hong Kong, the latest climate product by one of the city’s big financial institutions.

Retail customers would be able to subscribe in 10,000 yuan (US$1,545) increments, with the three-month CD paying a fixed rate of 2.02 per cent per annum, according to HSBC. The subscription period will run from Monday until February 26, with the CDs issued on March 5.

HSBC, one of the city’s three currency issuing banks, said proceeds from the green CD would be used for financing businesses and projects that “promote the transition to a low-carbon, climate resilient and sustainable economy”.

The new product comes as financial institutions are facing increasing pressure to address climate change in their lending and investment practices and Hong Kong seeks to market itself an international centre for green finance, particularly around the development of the Greater Bay Area.

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Sustainability: Green bonds to help drive China's push towards carbon neutrality

In January, 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, raising US$2.5 billion. HSBC, alongside Credit Agricole, acted as joint global coordinators on the Hong Kong government’s latest green bond.

The city’s government said in 2018 that it would seek to issue up to HK$100 billion (US$12.9 billion) in green bonds.

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

In November, the Hong Kong Monetary Authority (HKMA), the city’s de facto central bank, said it would team up with the International Finance Corporation (IFC) to help commercial banks address climate change as part of the new Alliance for Green Commercial Banks. The IFC estimates there are more than US$29 trillion in green and climate investment opportunities over the next decade.

In December, a working group led by the HKMA and the Securities and Futures Commission said financial firms in the city would be required to declare how their assets and investments affect climate change beginning in 2025.

Demand for green financing is rising as China and other governments in Asia have pledged to reach carbon neutrality by 2060.

HSBC itself has faced investor pressure over continued financing of the fossil fuel industry.

ShareAction, a UK-based responsible investment charity, organised a group of 15 institutional investors with a combined US$2.4 trillion in assets under management in January to file a shareholder resolution seeking that the bank outline its strategy on how it plans to reduce its exposure to fossil fuel assets.

HSBC chairman Mark Tucker has defended the need to provide transition financing to clients as the world seeks to address climate change. Photo: Handout

Speaking at the Asian Financial Forum on January 18, HSBC chairman Mark Tucker defended the need to provide transition financing to clients, saying divestment was not the best option for the environment or communities that rely on traditional industries.

There’s also a “significant business opportunity” in providing transition financing, Tucker said.

In October, HSBC, Europe’s biggest by assets, announced that it planned to reduce financed emissions from its own portfolio to net zero by 2050 or sooner, including providing up to US$1 trillion in financing and investment by 2030 to help clients achieve that goal.