Hong Kong's ESG bond issuance quadruples to almost US$35 billion as city takes shape as Asia's hub for green finance
Hong Kong is staking a claim as Asia's green finance hub, as the number and value of bonds related to environment, social and governance (ESG) quadrupled over the past year.
As many as 90 ESG bonds were issued this year, raising a combined HK$270 billion (US$34.62 billion), four times what was sold last year, according to Nicolas Aguzin, chief executive of Hong Kong Exchanges and Clearing Limited (HKEX), the operator of the city's bourse.
"HKEX has turned climate risk into opportunities by providing a fundraising platform for projects related to environmental protection, substantiality and diversity," Aguzin said during a seminar in the city.
Do you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team.
ESG-related debt, also called sustainable bonds, are fixed-income financial products that raise capital for the purpose of financing projects that have environmental or social benefits. Their proceeds are also earmarked for renewable energy projects, conservation or energy efficient projects that help reverse climate change or halt the emission of greenhouse gases.
Nicolas Aguzin, chief executive officer of Hong Kong Exchanges & Clearing Limited (HKEX), speaking during the Hong Kong Fintech Week in Hong Kong on November 4, 2021. Photo: Bloomberg. alt=Nicolas Aguzin, chief executive officer of Hong Kong Exchanges & Clearing Limited (HKEX), speaking during the Hong Kong Fintech Week in Hong Kong on November 4, 2021. Photo: Bloomberg.>
Hong Kong, which has a sound capital market infrastructure and a big pool of financial liquidity provided by international investors, can live up to its mission as the international fundraising hub in the Greater Bay Area (GBA) to promote low carbon emission projects and other ESG projects, he said. The outline development plan for the GBA released in 2019 supported Hong Kong's role as the green financing hub.
The HKEX itself is investing for the future, paying 210 million yuan (US$32.45 million) this year for 7 per cent of a newly created Guangzhou Futures Exchange to develop products that can be traded onshore and offshore in Hong Kong by international investors.
David Liao, co-chief executive of HSBC Asia Pacific, speaks at the Hong Kong economic summit 2022 at the Four Seasons Hotel Hong Kong in Central on Monday, December 6, 2021. alt=David Liao, co-chief executive of HSBC Asia Pacific, speaks at the Hong Kong economic summit 2022 at the Four Seasons Hotel Hong Kong in Central on Monday, December 6, 2021.>
The market for sustainable bonds will continue to grow, especially in Hong Kong and mainland China, said HSBC's Asia-Pacific co-chief executive David Liao, as businesses and government authorities get with President Xi Jinping's pledge to turn China into a carbon neutral economy by 2060.
"Sustainable bonds will reach US$1 trillion this year, which has now grown to become 10 per cent of all bond offerings this year, compared with less than 5 per cent in 2019," Liao said at the conference. ESG bonds now make up 21 per cent of Hong Kong's total bond offerings, compared with 18 per cent in China, 15 per cent in Asia Pacific, Liao added.
"We have witnessed the increasing popularity of green finance among corporate issuers and investors," he said, adding that the trend would reinforce Hong Kong's role as China's offshore yuan trading centre.
ESG ranking of Hong Kong-listed companies. alt=ESG ranking of Hong Kong-listed companies.>
The city's government has already issued more than US$7 billion of green bonds, said Eddie Yue Wai-man, the chief executive of the Hong Kong Monetary Authority (HKMA), the de facto central bank.
"The overall green financing ecosystem has matured in Hong Kong," Yue said. "We would like to see more local authorities in mainland China issue green bonds in the city."
The trend kicked off in October when Shenzhen's city government issued 5 billion yuan worth of so-called dim sum bonds, as yuan-denominated debt issued in Hong Kong are called. The first direct offshore debt offering by a local-level mainland government in Hong Kong was overbought by global investors by 2.5 times.
Yue said the HKMA and the mainland authority will explore how to add in more products in the cross border connect schemes between Hong Kong and the mainland.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2021 South China Morning Post Publishers Ltd. All rights reserved.
Copyright (c) 2021. South China Morning Post Publishers Ltd. All rights reserved.
