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Hong Kong raises US$1b in oversubscribed first green bond

[HONG KONG] Hong Kong raised US$1 billion from the sale of its first green bond on Wednesday, as the former British colony looks to establish itself as a centre for green finance.

Hong Kong sold a five-year US dollar-denominated green bond with a coupon of 2.5 per cent, attracting over US$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 (S$17.55 billion) green bond programme to fund projects around clean transportation, air quality improvement and green buildings. It is one of the largest green bond schemes globally.

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"The favourable 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 US$41.3 billion so far this year, Refinitiv data showed, while sovereigns have raised US$17.8 billion.

Asia accounted for US$12 billion of the corporate green bonds and US$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 per cent going to Asia, 27 per cent to Europe and 23 per cent to the United States, the HKMA said.

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

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

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