The enlarged green future bond of Hong Kong Special Administrative Region is active in euros, renminbi, and U.S. dollars. The co-arrangers of the transaction are Hong Kong-based Bank of China and HSBC. Its track record and stand represent the SAR’s pioneering of sovereign retail green bonds.
They increased their green programme to HK$200bn in the 2021-22 budget year. With its green bond programme, the process of both institutional and retail issuers would go to the SAR’s Capital Works Reserve Fund. It is to finance or refinance the green project providing benefits to the environment and supporting Hong Kong’s sustainable development.
However, this scenario is in contrast to the UK’s Green Savings Bonds. The initial green bonds target individual investors. The product of a non-tradeable plain vanilla instrument priced flat to Gilts. So, no feature of enhancement or inflation linkage. Plus it does not define a marketing timetable that failed to attract significant demand.
From launch to the UK hosting the COP26 international climate summit they only reached $394m. The number is from sales via the state-owned National Investment and Savings. The spokesperson said that for NS&I, the green market is still new. So, they still learn about this sector. The green savings bonds have just begun in October 2021. Thus, they still adjust the customer behavior and the balance between interest rate and the attraction to savers. Plus, they must make sure that everything must suit the product delivery and investment.
The structure of the deal is like another sovereign retail ESH bond series. Another country like Italy has enlarged over $22bn of four issues for its BTP Futura. In Italy, it supports the national recovery from pandemic. The deals pay a premium of 1%-3% at maturity depending on the country’s GDP growth.
