May 21, 2019 / 3:59 AM / a month ago

Hong Kong raises $1 billion in oversubscribed first green bond

HONG KONG (Reuters) - Hong Kong raised $1 billion from the sale of its first green bond on Wednesday, as the former British colony looks to establish itself as a center for green finance.

FILE PHOTO: Lights light up the skyline of Hong Kong, China in the evening of June 8, 2017. REUTERS/Bobby Yip

Hong Kong sold a five-year U.S. dollar-denominated green bond with a coupon of 2.5%, attracting over $4 billion in orders from investors globally, the Hong Kong Monetary Authority said.

The proceeds from green bonds get earmarked for investment in environmentally friendly projects.

Wednesday’s bond is the first to be issued under Hong Kong’s HK$100 billion ($12.74 billion) green bond program to fund projects around clean transportation, air quality improvement and green buildings. It is one of the largest green bond schemes globally.

“The favorable response from global investors indicates not only their recognition of Hong Kong’s credit strength, but also their support of Hong Kong’s determination and efforts in promoting sustainable development and combating climate change,” said Paul Chan, Financial Secretary of Hong Kong.

Green bonds account for a small portion of the global bond market but are expected to gain in size, particularly in Asia which has lagged other regions such as Europe.

Worldwide corporate green bond issuance is at $41.3 billion so far this year, Refinitiv data showed, while sovereigns have raised $17.8 billion.

Asia accounted for $12 billion of the corporate green bonds and $2.6 billion of the sovereign paper, the data showed.

Over 100 global institutional investors placed orders for Hong Kong’s green bond, with 50% going to Asia, 27% to Europe and 23% to the United States, the HKMA said.

Sovereign wealth funds, supranationals and central banks took up the biggest share of the bond at 41%.

Indonesia was the first Asian country to sell a green bond in 2018, raising $1.25 billion.

Credit Agricole and HSBC were joint global coordinators for Hong Kong’s green bond.

Editing by Shri Navaratnam

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