Hong Kong

Green Bond Market Briefing
May 2020

Green Bond-HK issuers: Cumulative issuance USD7.1bn: FY 2019 USD2.6bn, down 5% on FY 2018
Green bonds arranged and issued in HK: USD26bn overall; USD10bn in 2019*
Low-Carbon Buildings remain dominant theme, new government green issuance and support measures

Issuance from real estate developers remained one of the key drivers
for the domestic green bond market. Newcomer Hysan MTN Limited
tapped the market with four green bonds (USD197m) in 2019. A growing
number of real estate developers opted for green loans to financeprojects in 2019, including The Wharf Holdings, Hang Lung Properties
and Capital Court Limited (a subsidiary of Lai Sun Development).2

2019 marked by most diversity and firstgovernment green bondSix Hong Kong issuers came to market in 2019. Only the Hong Kong
Special Administrative Region (HKSAR) Government and Link REIT
issued benchmark-sized deals in 2019, with a USD460m green loan
to Capital Court Limited coming close. Despite being the smallest
issuer by volume (USD197m), market debutant Hysan was the mostprolific with four deals from January to May.
In terms of issuer types, the mix changed significantly in 2019. Hysan
was the only Non-Financial Corporate of the year - the other three green
deals from Non-Financial Corporates are classified as loans. The drop
in issuance from this issuer type was compensated by Hong Kong’s firstgovernment deal as well as the first deal from a Financial Corporate
since 2016 (the same issuer, Link REIT). 2019 was also the first year with
no issuance from Government-Backed Entities. Overall, there were four
different issuer types, making 2019 the year with most diversity so far.

Low-Carbon Buildings reach record-high of 61%
While the mix of proceed allocations was quite varied in 2019 witheight categories financed, the share of Buildings grew to almost twothirds (61%), the highest yet. Allocations to Buildings now represents
just under half (48%) of the total cumulative amount issued.
All nine deals from 2019 were intended to finance Buildings tosome degree, and four only funded this category. The three largest
allocations by volume came from the Buildings category, Link REIT
(HKD4bn/USD510m), Capital Court Limited (HKD3.6bn/USD460m)
and The Wharf Holdings (HKD2bn/USD255m), respectively. The next
largest category was Waste (8%), followed by Industry, Transport,
Water, Land Use all at 6% and Energy at 5%. This range was driven by
HKSAR’s Government’s deal, whose Green Bond Framework listed all
categories except ICT as eligible. Waste additionally benefitted fromallocations from Hysan’s four bonds, which also financed Buildings,
Adaptation and Energy Efficiency across sectors.

Climate Bonds’ approach to determining abond’s country
Climate Bonds uses the country of risk to determine how toassign a country to each bond.
For unsecured bonds, the country of risk is determined by
the domicile of the issuer. If it is a fully owned subsidiary, thisbecomes the domicile of the parent or group.
For secured bonds, the country where the assets used ascollateral are located is considered. However, a parent guarantee
or other recourse to a parent company in another domicile
would influence the determination.
We do not take currency denomination, listing venue or similar
factors into account to determine the country.

Increasing diversity of issuer types in Hong Kong
3

Financial corporate

Non-financial corporate

Government-backed entity
Amount issued (USDbn)

The Hong Kong green bond market in 2019 was characterised by theGovernment’s continued support, notably the inaugural government
green bond, coupled with measures from the city’s financial regulators.
Total issuance by Hong Kong-domiciled entities was down slightly
to USD2.6bn (HKD20bn)1, a decrease of 5% or USD140m on
2018, offset by increasing diversification of issuer types and project
categories funded by green bonds.

2

Sovereign

Loan

2016

2017

1

0
2018

2019

Nearly two-thirds allocated to Low-Carbon Buildings
Industry 6%
Land Use 6%

Waste
8%
Water
6%
Transport
6%

Unallocated A&R 2%
Energy 5%

Buildings
61%* Note: HKMA figures capture green bonds only, for which a majority of bond arranging activities takeplace in Hong Kong. See p. 3.

Hong Kong green bond market briefing Climate Bonds Initiative1

Hong Kong

A significant share (85%) of 2019 green issuance volume, and 100%of 2019 green bond issuance volume in Hong Kong benefits from atleast one type of external review. 67% carries a second party opinion(SPO). Vigeo Eiris was the top external reviewer in 2019 benefitingfrom the USD1bn inaugural green bond from HKSAR Government.
This is followed by Sustainalytics with 28% market share, composedof two deals from two Hong Kong property companies – Hysan and
Link REIT. 18% of the 2019 issuance carries assurance from Hong
Kong Quality Assurance Agency (HKQAA). The remaining 15% that
do not have any form of external reviews are green loans.

85% of issuance has at least one type of external review

6
Guangdong
4

Hong Kong
Macau

2

0
2016

2017

2018

2019

81% of HK green bonds carry post-issuancedisclosure

N.A.
15%
SPO
Vigeo Eiris
39%

Assurance
HKQAA
18%

GBA green bonds grew 54% in 2019

Amount issued (USDbn)

External reviews are common

SPO
Sustainalytics
28%

Denomination in local currency on the rise
While in 2018 USD-denominated deals dominated (66%), 2019 saw
HKD-denomination rising strongly with eight deals from five issuers
accounting for 61% of the volume. The remaining deal was the
HKSAR Government green bond, denominated in USD.
2019 was the first year in which the majority of volume wasdenominated in local currency, and the first year since 2016 withdenomination in only two currencies (USD and CNY in 2016).

HKEX remains the most popular listing venue
Hong Kong Stock Exchange (HKEX) remained the largest venue for
China’s offshore green bond listing. In addition to Hong Kong’s local
issuance, such as the USD1bn government green bond, there are
USD7.3bn worth of green bonds from ten mainland China domiciled
issuers listed on HKEX. Examples include Jiangxi Provincial Water,
Wuhan Metro, ICBC Financial Leasing, and the GBA-themed deals
from Agricultural Development Bank of China (ADBC) and Zhuhai
Da Hen Qin Investment.

Greater Bay Area green bonds on the rise
In addition to the Hong Kong green deals, there were USD2.9bn
worth of green bonds from Guangdong-based issuers in 2019. The
USD963m green bond placed by Bank of China through its Macau
Branch marked inaugural issuance in Macau SAR.3 Total volume ofgreen bonds from Greater Bay Area (GBA)-domiciled issuers reached
USD6.4bn in 2019, a 54% increase year on year.
In addition to Zhuhai Da Heng Qin Investment as a local issuer who
brought a GBA-themed green bond financing green buildings in theregion, the Industrial and Commercial Bank of China and ADBC havealso issued GBA-themed green bonds with proceeds dedicated togreen development in the area.
Hong Kong green bond market briefing Climate Bonds Initiative

Post-issuance reporting allows investors to track the allocationof green bond proceeds during the life of the assets or projects
financed. It provides transparency and enhances the credibility ofgreen bonds, contributing to market integrity. The Climate Bonds
Standard requires compulsory reporting on proceeds allocation atleast annually for Certified Climate Bonds; the Green Bond Principles(GBP) and other local guidelines also encourage issuers to report toinvestors on the indications given at issuance regarding the use ofgreen bond proceeds and, ideally, also project or portfolio impact.
In 2019, Climate Bonds conducted a survey of 48 of the largest
Europe-based fixed income asset managers, with total assets undermanagement (AUM) of EUR13.7tn. The survey found that green
credentials and transparency are highly valued by investors. The
majority of respondents stated that poor post-issuance reporting
would (55%) or could (30%) lead to bond sale, while only 15%
stated they would hold the bond regardless.
Given that most guidelines encourage annual reporting, we allowed
time for a year to lapse with a grace period for reporting to bemade public. Climate Bonds analysed green bonds issued up to 31
December 2018 and excluded bonds that had matured before thecut-off date. Of the USD4.5bn worth of green bonds from 12 issuers
since 2016, 81% (or USD3.6bn) carries disclosure on the proceeds
allocation at post issuance stage. The absence of public disclosure iscommon among privately placed deals.

Best practice example
Government-Backed Entity: MTR
MTR publishes an annual standalone Green Finance Report,
which details the company’s green finance portfolio andthe project portfolio funded, alongside an assurance reportconfirming its compliance with the GBP.
As per the 2018 Green Bond Report, the green finance portfolio
of MTR consisted of nine green bonds and one green loan. MTR
gives a breakdown of how the green finance proceeds wereallocated to different projects. A description of each green
project is also included in the report.
In terms of the environmental benefits, MTR provides the GHG
emissions avoided in tonnes CO2e for low carbon transportation
projects and energy conservation (estimates) in kWh (MWh)for energy efficiency projects. The methodology for estimating
environmental benefits of railway lines is given in the appendix
of the report.

2

Hong Kong

Distinction between Climate Bonds’ and HKMA’s approach to measuring market size
To reflect the size of Hong Kong as an international financial centre for green bond issuance, the Hong Kong Monetary Authority(HKMA) adopts a different methodology to Climate Bonds (as described on p.1) in measuring the green bond market size.
The HKMA considers a green bond as issued in Hong Kong if a majority of its arranging activities take place in Hong Kong. Bondarranging activities comprise originating and structuring, legal and transaction documentation preparation, and sale and distribution.
Albeit Climate Bonds and HKMA use different approaches to determine market size, all the green bonds captured by the HKMA
are aligned to Climate Bonds green definition. While Climate Bonds includes green loans and green panda bonds issued in mainland
China by Hong Kong entities in its figures (given the domicile of the issuer), HKMA does not include them in its green bond tally.

Market dynamics from a broader perspective: green bonds arranged by banks in Hong Kong
In 2019, USD10bn of green bonds was arranged and issued in HongKong. This compares to USD11 bn in 2018. Cumulative green bondissuance amounted to USD26bn by the end of 2019.

Cumulative green bonds arranged and issued in
Hong Kong amounted to USD26bn by 201930
GermanyJapan
20

Hong Kong
Mainland China

Government
10.1%
Financial
Institutions
49.4%

USD green bond dominated the universe, accounting for 81% of
issuances by volume. This mostly reflects the landscape of the broader
international bond market in Asia, in which USD predominates.
HKD ranked a distant second, accounting for about 13% of total
issuance volume and CNY accounted for 6% of the issuance,
mainly by Mainland financial institutions.

10
5
0
2015

2016

2017

2018

2019

Hong Kong’s robust green bond platform, supportive government
policies and strong expertise and investor base attracted many
new issuers to the market, with more than half (55%) of issuers in2019 being first-time issuers in Hong Kong.
Mainland Chinese entities continued to drive the market, with
an issuance size totalling USD8bn in 2019, or 79% of the market,
representing a year-on-year growth of 10%. Hong Kong has long
been the preferred offshore fundraising centre for Mainland
enterprises. Given their familiarity with the infrastructure,policies and bank expertise in Hong Kong, as well as the growing
community of green consulting and accreditation services, most
Mainland issuers regard Hong Kong as their first destination toraise offshore funds.
Financial institutions (FIs) contributed almost half of the green
bond issuance in Hong Kong, including Industrial and Commercial
Bank of China and China Construction Bank etc.
Corporates were the second largest issuer type, making up 36%of the total market, including real estate companies, energy firms
and others. The rest of the issuances came from government,
development/ policy bank and MDBs.

Hong Kong green bond market briefing Climate Bonds Initiative

81% of the issuance are denominated in USD

HKD
13%

CNY
6%

USD
81%
All graphs: HKMA, according to HKMA methodology

Amount in USD bn

Corporate- Energy
6.2%

MDB 0.3%

Corporate Real Estate
18.8%

Korea
MDB

15

Policy/Development
Bank 4%

Corporate Others
11.2%

Singapore25

2019: Issuers come from diverse sectors

In terms of tenor, the majority (98%) of issuances by volume in2019 were in the short (up to 5 years) and medium-term (5 to 10
years) space. 67% of short-term deals are from FIs. Medium-term
deals are popular amongst corporates (46% of 5-10Y issuance)and FIs (33%). Only local real estate companies have issued
longer-dated bonds, with maturity of 10 years or above.

3

Hong Kong

Short to medium term tenors are popular

Deal size was quite even across the board, with 37% of the total
number of deals being USD500m or more in size, 33% in the
USD100-500m range, and 30% being up to USD100m in size.

<5yr

Breakdown of deals in size
1bn or more

500m-1bn

100-500m

Up to 100m

100%

5-10yr80%

10-15yr

60%

0

1

2

3

4

5

USD Billions (amount issued)

40%

20%

Financial Corporate

Corporate - real estate

Corporate - Energy

Corporate - others

Government-backed entity

All graphs: HKMA, according to HKMA methodology

15-20yr

MDB

0%
Count

Policy/Development Bank

Amount (USD)

Case Study: HKSAR Government’s Inaugural Green Bond IssuanceSize: USD1bn
Date of pricing: 21 May 2019
Tenor: 5 years
External review: Vigeo Eiris, the Hong
Kong Quality Assurance Agency(HKQAA)
Eligible Project Categories under theGreen Bond Framework: renewableenergy, energy efficiency andconservation, pollution prevention
and control, waste management andresource recovery, water and wastewater
management, nature conservation/
biodiversity, clean transportation, green
buildings

Strong interest from investors and pricetightening
The deal attracted strong interest from adiverse group of conventional and green
investors. Orders exceeding USD4 bn - morethan 4 times the issuance size, were received
from over 100 global institutional investors,
and 50% of the green bond was distributed
to Asia, 27% to Europe and 23% to theUnited States. By investor type, 29% was
distributed to banks, 30% to fund managers,
private banks and insurance companies, and
41% to sovereign wealth funds, central banks
and supranationals.
The strong demand led to pricing being
tightened by 17.5 basis points from the initial
price guidance to 2.555% (32.5 basis points
over 5-year US Treasuries).

Investor type breakdown

Banks
29%

Sovereign wealthfunds, central
banks, sovereigns,
supranationals,
agencies, andothers 41%

Fund managers,
insurancecompanies andprivate banks 30%

Government and regulators as key enablers for development of Hong Kong as a green finance hub
While the HKSAR Government supported the market
momentum and liquidity with its inaugural green bond offering,financial regulators in Hong Kong also ramped up efforts inenabling the robust development of green finance in 2019.
Looking ahead, Climate Bonds expects that the Governmentand regulators will continue to support accelerating any green
and climate finance initiatives in Hong Kong, and bolster Hong
Kong’s positioning as a green and sustainable finance hub
for the region.

Hong Kong green bond market briefing Climate Bonds Initiative

Securities and Futures Commission (SFC)In April 2019, the SFC issued a circular to provide guidance on enhanced
disclosures for green or ESG funds, a fund should demonstrate to the
SFC that at least 70% of its total net asset value is invested in securities
and other investments reflecting the stated green or ESG related
investment focus. The SFC set up a dedicated webpage late last year
to increase the visibility of the SFC-authorised green or ESG funds
that are compliant with the requirements set out in the circular.

4

Hong Kong

Hong Kong Monetary Authority (HKMA)In May 2019, the HKMA launched three sets of measures thatrevolve around green and sustainable banking, responsible investing,as well as capacity building in green finance, to support thedevelopment of sustainable finance in Hong Kong.
The HKMA takes a three-phased approach to promote green andsustainable banking - in Phase I, the HKMA would develop with thebanking industry a common framework for green baseline assessment,
which would examine the environment risk of the bank’s lending and otherbusinesses; in Phase II and III the HKMA will be focusing on deliverable
setting, and implementation, monitoring and evaluation respectively.
As the manager of the Exchange Fund, the HKMA has committed
to support responsible investment, by further growing green bondportfolio, participating in ESG-themed public equities investments
and prioritising investment in buildings with green accreditation for
the real estate portfolio.
The HKMA has also set up the Centre for Green Finance (CGF) underthe Infrastructure Financing Facilitation Office (IFFO) for capacity
building and experience sharing.
Hong Kong Stock Exchange (HKEX)In December 2019, the HKEX announced key changes to the ESG
Guide and related Listing Rules, requiring disclosure of significant
climate-related issues that have impact on the issuer and relevant
environmental targets. Changes will be effective for financial years
commencing on or after 1 July 2020.

News and events
The HKSAR Government becomes thefirst signatory of Green Bond Pledge
from Asia
In May 2019, the HKSAR Government
signed the Green Bond Pledge andbecame the first signatory from the Asian
region. By signing the Green Bond Pledge,
governments, international agencies andprivate sector companies agree that all
infrastructure and capital projects will need
to be climate resilient and where relevant,support the reduction of greenhouse gas
emissions. Also, signatories of the Green
Bond Pledge agree to support the rapid
growth of a green bonds market consistent
with global best practices and will issue
bonds for infrastructure as green bonds
whenever applicable.
The Green Bond Pledge is a joint initiative
developed by international climate financeand sustainability groups, including the
Climate Bonds Initiative.

The HKMA becomes a member of the NGFSIn Q2 2019, the HKMA joined the Central
Banks and Supervisors Network for Greening
the Financial System (NGFS), which is agroup of central banks and supervisory
authorities that are willing to exchange
experiences, share best practices, contributeto the development of environment andclimate risk management in the financial
sector, and to mobilise mainstream
finance to support the transition toward asustainable economy.
HKMA CGF and IFC host seminar on
Greening Financial Institutions
In October 2019, the CGF and theInternational Finance Corporation (IFC), coorganised a seminar on “Greening Financial
Institutions”, which brought together over
300 senior executives, comprising bankers,
corporate treasurers, project developers andoperators, and professional service providers.

Three major trends to watch in 2020
Greater synergies among the Greater Bay Area cities
China’s State Council unveiled details of the Outline Development
Plan for the Guangdong-Hong Kong-Macau Greater Bay Area inFebruary 2019. The Plan identifies the role of Hong Kong, Macau andthe nine other cities in the Guangdong Province in national economic
development. Under the Plan, Hong Kong is the designated green
finance centre, Macau and Guangzhou are tasked with building a
RMB-denominated green finance platform and developing a pilot
green finance innovation zone, respectively. The Plan is expected togive fresh impetus to the development of green finance in the region.
The Hong Kong Green Finance Association (HKGFA) announced aplan to establish the Greater Bay Area Green Finance Alliance (GBAGFA) to facilitate the greening of the region in September 2019.
In collaboration with the Guangzhou Green Finance Committee,
Shenzhen Green Finance Committee and Macau Association of
Banks, this platform will host research projects and incubate green
investment projects in five key areas: greening the supply chain,enhancing major waste treatment facilities, promoting green building
Hong Kong green bond market briefing Climate Bonds Initiative

The Seminar highlighted how financial
institutions are increasingly factoring inclimate-related risks in various aspects,
and the various principles and tools forcorporates to transition their businesses
and financing strategies, as they consider
how their lenders and investors view theircommitments on Environment, Social andGovernance (ESG).
HSBC issues Asia’s first green retailcertificates of deposits in HK
In December 2019, HSBC offered its Hong
Kong retail and commercial customers thefirst green retail certificate of deposit. The
annual coupon rate of the three-month
Green CD was fixed at 1.71%, with aminimum deposit amount of USD10,000.
Proceeds will go towards financing eligible
businesses and projects that promote thetransition to a low-carbon, climate resilientand sustainable economy as defined by
the HSBC Green Bond Framework.

“As a rapidly growing green finance market, Hong Kong will playa key role in the green development of the Greater Bay Area,
including by assisting on green bond issuance and project financing.
The Government’s blueprint for the Greater Bay Area provides agolden opportunity for the green finance sector in the region, andwill stimulate further knock-on growth for Hong Kong’s banking,investment management, insurance and private equity industries.”
Ma Jun, Chairman and President of the HKGFA

projects, as well as scaling up blockchain solar and carbon trading.
The projects will benefit the GBA and leverage the vast green
investment demand in Guangdong along with the green financecapacities of Hong Kong and Macau.
The first GBA-GFA pre-launch meeting successfully took place on
12th January 2020, where 60 leaders and subject matter experts
from four respective cities (i.e. Hong Kong, Guangzhou, Shenzhen
and Macau) agreed on a key operating arrangement of the Alliance.
The official launch date is targeted for second half of 2020.
5

Hong Kong

Green finance and climate-related risk disclosure
Enhancing the climate-related risk and financial disclosures ofcompanies has been gathering momentum across the globe since
the Task Force on Climate-Related Financial Disclosures (TCFD)
published its recommendations in mid-2017. In Hong Kong,
companies such as Swire Pacific and New World Development havestarted to report against TCFD recommendations, in which green
bond issuance forms a part of the narrative when it comes to thedisclosure of a company’s climate change mitigation strategy – one of
the four pillars of the TCFD framework.
As regulators in mainland China and Hong Kong ramp up
efforts to improve listed companies’ ESG reporting - for example,
the SFC supporting TCFD recommendations and the HKEX
enhanced ESG disclosure requirements – it is expected that more
and more companies will revisit their existing businesses. Greenfinance plays a pivotal role in enabling the decarbonisation
strategies of those companies that strive to achieve net zerocarbon targets.
Green transition – the opportunity of the decade
Despite the global green bond market recording rapid growth withcumulative issuance exceeding USD700bn in 2019, the market has
seen contributions from a relatively limited universe of investment
grade issuers, mostly government-related entities, financial
corporates and utility companies.

To address the imminent climate crisis, companies across all sectors will
be involved in low carbon transition. Transition bonds, KPI-linked bonds
and loans can play an important part in ensuring finance supports forcompanies that seek a brown-to-green transition of their businesses.
Investors are showing growing appetite for fixed income productsthat reflect the transition towards sustainability. A broader range ofissuers, a wider credit spectrum and expanded use of proceeds cancater to investor demand to enhance yield and sector diversification
within their sustainable investment portfolios.
The world has embarked on a decisive decade of tackling climate
issues. Ambitious action aimed at delivering 45% greenhouse gas(GHG) reductions by 2030 is indispensable for meeting the Parisaligned net zero goal by 2050.4
For Hong Kong to support this outcome, the Government can act asa facilitator for collaboration between the local and mainland China
authorities to bring about a brown-to-green transition in a number ofsectors that are vital for the future low carbon economy.
Decarbonising the shipping and aviation sectors could be assisted
by leveraging Hong Kong’s core advantage as a regional logistics andfinance hub.
Additionally, Hong Kong is set to update its climate action planin 2020.5 Clear commitments in the city’s 2050 decarbonisation
strategy, will add incentive to the private sector to seek green andtransition aligned investment opportunities.

Endnotes
1. The 2018 green bond tally is adjusted to reflect the re-classification and bonds update in the Climate
Bonds Initiative Green Bond Database, where USD390m worth of issuance is added.
2. Several green loans from Hong Kong-domiciled entities are not included in the 2019 total issuanceamount due to insufficient disclosure of deal size or use of proceeds.
3. In Climate Bonds Initiative Green Bond Database, the deal is categorised as from a mainland China
issuer since Climate Bonds looks at the country of risk at parent company level. However, for the
purpose of showing GBA issuance, the bond is considered as a Macau issuance in this report.
4. Intergovernmental Panel on Climate Change (2018) [Online]. Available at https://www.ipcc.
ch/2018/10/08/summary-for-policymakers-of-ipcc-special-report-on-global-warming-of-1-5capproved-by-governments/
5. Environment Bureau (2017) [Online]. Available at https://www.enb.gov.hk/sites/default/files/pdf/
ClimateActionPlanEng.pdf

Supported by the Hong Kong Monetary Authority

Supported by the Hong Kong
Green Finance Association

Gold Partner – HSBC

Authors: Ivy Lau, Miguel Almeida, Alan Xiangrui Meng and Amanda Giorgi, Climate Bonds Initiative
Acknowledgement: Grace Wong and Ting Wang, HKMA, Tracy Wong Harris, HKGFA© Published by Climate Bonds Initiative, May 2020
Disclaimer: The information contained in this communication does not constitute investment advice in any form and the Climate Bonds Initiative is not an investment adviser. Any reference to a financialorganisation or debt instrument or investment product is for information purposes only. Links to external websites are for information purposes only. The Climate Bonds Initiative accepts no responsibility forcontent on external websites. The Climate Bonds Initiative is not endorsing, recommending or advising on the financial merits or otherwise of any debt instrument or investment product and no information within
this communication should be taken as such, nor should any information in this communication be relied upon in making any investment decision. Certification under the Climate Bond Standard only reflects
the climate attributes of the use of proceeds of a designated debt instrument. It does not reflect the credit worthiness of the designated debt instrument, nor its compliance with national or international laws. A
decision to invest in anything is solely yours. The Climate Bonds Initiative accepts no liability of any kind, for any investment an individual or organisation makes, nor for any investment made by third parties onbehalf of an individual or organisation, based in whole or in part on any information contained within this, or any other Climate Bonds Initiative public communication.

Hong Kong green bond market briefing Climate Bonds Initiative

6