Hong Kong plans first digital green bond offering, said to target US$102 million proceeds

The government has asked the Bank of China, Credit Agricole, Goldman Sachs and HSBC to hold investors calls on Monday, Bloomberg reports
The tokenised notes would be a ‘pilot issuance’ to test regulatory framework and financial infrastructure, a top government official said last week

Bonds

Mia Castagnone

Published: 3:09pm, 13 Feb 2023

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The Hong Kong government is preparing to sell its first digital green bonds as early as this week, a move that one top official said will test the city’s existing legal and regulatory framework amid a push into sustainable financing and virtual assets.

Proceeds from the proposed local-currency notes will be used to finance or repay eligible projects under the city’s green bond framework, Fitch Ratings said in a note on Sunday. A blockchain-underpinned technological platform is involved in relation to the issuance of the securities, it added.

The government hopes to raise HK$800 million (US$102 million) and has asked the Bank of China, Credit Agricole, Goldman Sachs and HSBC to hold investor calls on Monday, according to a Bloomberg report. The interest earned on the tokenised notes will be recorded on a blockchain platform provided by Goldman Sachs, it added.

Joseph Chan, Hong Kong’s under secretary for financial services and the Treasury, last week indicated the tokenised green bonds would be a “pilot issuance to test out the compatibility of Hong Kong’s existing framework, financial infrastructure [and] market operational practice.”

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Digital bonds are a relatively new concept. Singaporean bank DBS was the first in Asia to automate bonds, while the European Investment Bank is also among notable lenders to have offered them.

Chan had earlier indicated that the offering would be relatively small and that the Hong Kong Monetary Authority (HKMA) will provide guidance for future issuers to scale up. The tokenised debt will be launched under the Government Green Bond Programme, the biggest of its kind in Asia.

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Fitch Ratings assigned Hong Kong’s proposed tokenised green bonds an F1+ rating. That indicates the strongest capacity for timely payment of short-term financial commitments, and the lowest default risk relative to others in the same country or denomination.

Hong Kong’s government sold US$5.75 billion of green bonds last month, denominated in US dollars, euro and renminbi.

The HKMA has recently announced several policies aimed at boosting the city’s goal of becoming Asia’s digital assets capital, including the introduction of a mandatory stablecoin licensing regime before 2024.

In November, Christopher Hui Ching-yu, the Secretary for Financial Services and the Treasury, said Hong Kong is aiming to expand the issuance of government green bonds more than five times within the next five years, compared with the amounts before 2021.

In addition, the city would launch a three-year programme to provide financial professionals with training on green and sustainable finance, with HK$200 million in funds contributing to the effort, he said via a video speech at the First Greater Bay Area Green and Sustainable Finance Summit, held in Shenzhen.

Cities in the region are looking to increasingly tap offshore and onshore markets as financing channels for green development, in line with Beijing’s climate-change goals of peak carbon emissions by 2030 and carbon neutrality by 2060.

Additional reporting by Martin Choi