Hong Kong Issues First Yuan-Denominated Green Bonds

Hong Kong moved one step closer to its ambition of becoming the centre of green financing in the Asia-Pacific by issuing yuan-denominated green bonds for the first time.

The government raised five billion yuan through the sale of three- and five-year green bonds that were split evenly. The two tranches attracted orders worth more than 14.2 billion yuan from a diversified group of investors, the Hong Kong Monetary Authority said in a Nov. 24, 2021, press release. Banks made up 54% of the buyers; fund managers, private banks, and insurance companies accounted for 35%; and supranationals, official institutions, and corporates took the rest.

Also known as climate bonds, green bonds are issued to raise funds for environmental projects, particularly those that target carbon emission reduction, clean transportation and water, energy efficiency, sustainable agriculture, and pollution. They often come with tax incentives, making them an attractive alternative to traditional bonds.

Hong Kong’s first yuan-denominated green bonds issuance comes on the heels of its debut green bonds in euro worth US$3 billion.

In a blog post on Nov. 21, Hong Kong Financial Secretary Paul Chan stressed the city’s goal to promote green finance development as part of its “30-60” targets for carbon emission reduction.

The government recently launched a slew of measures to boost green financing. In May, it rolled out a scheme that provides subsidy to corporate green bond issuers and loan borrowers to incentivise their green transition.

Hong Kong is also the first in Asia that “explicitly required the financial industry to implement the G20 climate-related financial disclosures by 2025,” Chan added.

Looking ahead, Hong Kong is eyeing to issue retail green bonds next.

“Through sharing the returns with the general public, our financial services can benefit more people while we enjoy a greener environment,” Chan said.