HK Government Relaunches Inaugural Retail Green Bond Issuance Plan
The Hong Kong government has resumed plans to issue its inaugural green bond following a series of delays due to a recent Covid-19 surge in the city-state.
Plans to make government-issued green bonds available to retail investors were first announced in the 2021-2022 Budget last February, as part of measures to enrich Hong Kong's green finance ecosystem. In early February this year, the government said it planned to raise a total HKD 6 billion (USD 768 million) through the issuance, in lots of HKD 10,000 each.
Designed for retail investor participation, the green bond's subscription was initially set to run from 1 March until 11 March, ahead of a 23 March listing, but the issuance was postponed on 26 February to avoid the further spread of Covid-19 cases.
The relaunch of the subscription arrangement for the government retail green bond will combine the last year's and this year's issuance targets to minimise issuance costs and administrative work.
As a result, the target issuance size of the retail green bond has been increased to HKD 15 billion. This could be further raised to a maximum HKD 20 billion based on the market response during the subscription period.
As set out in the government's green bond framework, the proceeds of green bonds will be credited to the Capital Works Reserve Fund to finance or refinance green projects that provide environmental benefits and support the sustainable development of Hong Kong. Information on the allocation of the proceeds and expected environmental benefits of the green projects will be provided annually.
The bond will have a three year tenor, with interest paid every six months at a rate linked to inflation in Hong Kong, subject to a minimum rate of 2.5 percent. The minimum annual interest rate under the original plan was 2 percent.
The new subscription period will run from 26 April to 6 May, following which the retail green bond will be listed on the stock exchange for secondary market trading on 19 May.
Hong Kong's government has already issued USD 7.2 billion in green bonds so far, targeting institutional investors. In the February 2021 budget announcement, it said it planned to sell HKD 175.5 (USD 22.5 billion) in sustainable debt over five years.
According to the Hong Kong SAR government, the cumulative amount of green bonds in the region was about $38 billion by the end of 2020. The government says it will continue to sell the equivalent of HKD 177.5 billion in government green bonds over the next five years.
Source: Regulation Asia
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