Making an impact through investing - green and inclusive bonds to support sustainable development in Hong Kong

●      High yield corporate credit and EMDs present compelling opportunities—JPM

●      Duration positioning is a risk management tool and a source of alpha

●      Green bonds present compelling opportunities for diversification

‘Going green’ is growing in the financial markets. Various countries have adopted new practices to encourage sustainable living and have an environmentally-friendly mindset. One way of facilitating this is by offering green bonds or climate bonds.

In 2020, Hong Kong saw the highest amount of green bonds issued, with a total of 15 internationally aligned bonds and one green loan, and the number of green bonds issued in 2020 totalled USD2.09bn.

Another highlight of 2020 was that Hong Kong issued USD12bn green debt in Hong Kong, and the cumulative amount of green debt for 2020 exceeded USD38bn globally. Most of the proceeds were used for low carbon buildings and low carbon transport with 36% and 26%, respectively.

All the green bonds and loans of 2020 prospered by external reviews by SPOs, and the most popular listing venue in the Asian area remains HKEX. Moving forward, Hong Kong aims to focus on green and sustainable income areas, such as promoting closer ties with the Greater Bay Area. 

The city is also committed to working towards a net-zero carbon future. One way of achieving this is by engaging the government, banks, regulators, investors, and private sectors to devise decarbonisation strategies and formulate action plans at the sectoral level.

Another goal is to boost transition finance to support the carbon neutrality goals that Asia has established. Hong Kong will continue its Green Bond Programme with HKSAR issuing about USD23bn in green bonds over five years with effect from 2021.

Hong Kong’s green and sustainable finance market continued to grow even amidst the COVID-19 pandemic in 2020, and the growth is not just in size but in diversity as well. Launching the new Green and Sustainable Finance Grant Scheme is one way of achieving this goal.

Darryl Chan, Executive Director (External) of the Hong Kong Monetary Authority, shared that many new issuers from around the globe have joined the market, together with varying financing instruments. He also confirmed that the aim is to enlist more investors, issuers, and service providers who can help expand the green and sustainable financial ecosystem. 

As a forerunner in the Asian bond market, HSBC has committed itself to driving sustainable business initiatives in Hong Kong. In addition, The Hong Kong Green Finance Association expressed their confidence in the country to acquire the much-needed capital to reach a net-zero and sustainable future.

The chairman and president of the Hong Kong Green Finance Association, Ma Jun, and the CEO of Climate Bonds Initiative, Sean Kidney, agree that Hong Kong’s future in green financing looks strong and is taking up a more prominent position in this region.

To gain the general public’s participation in the city’s sustainability initiative, the Hong Kong government has pledged to issue retail green bonds to the value of HK$6 billion (US$768.8 million) starting 1 March 2022. The population can ‘reap the benefits of sustainable development by doing this.

These bonds will have three years with a half-yearly interest payment. The interest will be an imposed minimum of 2% or higher depending on the average consumer price index rate. 

Previously individuals couldn’t get involved in investing their money as they didn’t have much choice regarding which projects or businesses they should support. However, technology has made investing much more accessible for everyone with a smartphone or tablet.

As Saxo Markets explains in their Money Matters campaign, the world can actively change for the better by choosing to invest in green bonds. Money has the potential to do great things, more significant than all of man’s efforts combined. Thanks to technology, the market flow can be steered by the people investing in it and not by the state alone. 

Although there are numerous possibilities when it comes to investing money, on its own, it wouldn’t know which path to choose unless someone makes the decision. The impact that it will have is therefore in your hands.