(Bloomberg) — Retail investors in Hong Kong will soon be able to buy green bonds for as little as HK$10,000 ($1,281) as the city looks to expand its role as a sustainable finance hub.
The Hong Kong government is selling up to HK$6 billion in green debt directly to investors for the first time, with proceeds used to back nine types of sustainable projects run by the city, Christopher Hui, secretary for financial services and treasury told reporters Tuesday.
Hong Kong joins other issuers including in the U.K. and Japan that are trying to expand the base of sustainable bond holders by reducing the investment thresholds and selling directly to the public. National Savings & Investments, a U.K. lender, launched a green savings bond last year that could be purchased for as little as £100 ($135).
The three-year bonds will pay an interest rate tied to inflation or a fixed rate of 2%, whichever is higher. The debt will be sold between March 1 and 11, and with many bank branches closed due to the pandemic, officials are encouraging online sales.
The city last year raised $1 billion selling traditional 10-year green bonds to institutional investors at 1.75%, and sold five billion yuan ($790 million) in green debt at 2.8% and 3% over three and five years.
Hong Kong has sold $7.2 billion in green bonds in all — including its first sales in euros last year — and aims to sell an additional HK$175.5 billion in sustainable debt over the next five years. Hong Kong has established a yield curve of green bonds of up to 30 years, said Edmond Lau, deputy chief executive of the Hong Kong Monetary Authority.
HSBC Holdings Plc and Bank of China (Hong Kong) Ltd. are leading the retail bond sale. The bond is likely to be eight to 10 times oversubscribed due to strong demand, said Arnold Chow, a deputy general manager at Bank of China (Hong Kong).
The Asian financial hub is trying to boost its presence in sustainable finance as trillions of dollars flow into the sector. The Hong Kong stock exchange is in talks with mainland China about developing a carbon market, and is collaborating on a separate green bond retail market using blockchain.
The central bank and the Bank for International Settlements have developed two prototype platforms intended to give retail investors easier access to this debt, while allowing them to track the environmental impact in real time.
“We have to take it step by step,” Lau said, when asked about the new blockchain program. “There is still some time until we can tokenize green bond issuance and distribution.”
(Updates with details of the terms in fourth paragraph)
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