Green Bond Issuance Hits Record High Amid Growing Investor Demand

Global Green Bond Market Sees Record Growth

Sustainable debt issuance reached a record level this year, with green bonds and similar debt instruments raising $273 billion in the first quarter. According to the Climate Bonds Initiative, issuance of green bonds jumped 43% from the previous quarter to $195.9 billion, putting green bonds on track to hit $1 trillion in issuance this year.

High interest rates and the erosion of the "greenium"—a discount in the cost of borrowing for green bonds—have bolstered demand for sustainable debt. Investors are increasingly drawn to green bonds for their attractive yields and environmental credentials. This trend contrasts with the outflows from ESG-focused stock funds, which have suffered due to poor performance and greenwashing scandals.

The surge in green bond issuance underscores the growing importance of sustainable finance in global markets, as investors and issuers alike seek to align their financial strategies with environmental goals.

Hong Kong Government Raises US$3.2 Billion via Multicurrency Green Bonds

The Hong Kong government has successfully raised US$3.2 billion through green bonds denominated in US dollars, euros, and offshore yuan, reinforcing its ambition to become a hub for sustainable finance and further the internationalisation of the Chinese currency. This issuance marks a significant milestone in Hong Kong’s sustainable finance journey.

The issuance includes a US$1 billion three-year dollar bond, a seven-year €750 million (US$819.75 million) bond, and a 10 billion yuan (US$1.38 billion) bond with maturities spanning two, five, ten, twenty, and thirty years, according to the Hong Kong Monetary Authority (HKMA). The respective yields are 4.336% for the three-year US dollar bond and 3.379% for the seven-year euro bond, with yuan bond interest rates ranging from 2.6% to 3.15%.

This green bond offering drew robust interest from global investors, including central banks, sovereign wealth funds, private banks, and insurance firms, garnering orders exceeding HK$120 billion equivalent. Financial Secretary Paul Chan highlighted the enthusiastic global response, underscoring Hong Kong's efforts in promoting low-carbon transformation and solidifying its status as a green finance hub.

Eugene Ng, Managing Director at HSBC Asia-Pacific, noted that Hong Kong's issuance of 20-year and 30-year green bonds denominated in yuan sets a new benchmark for other issuers, supporting liquidity in the longer part of the offshore yuan curve.

The proceeds from these bonds will finance projects that provide environmental benefits and support sustainable development. Notably, Hong Kong was the top issuer of climate-aligned government bonds in Asia and the fifth globally last year, according to the Climate Bonds Initiative. The city aims to halve carbon emissions by 2035 and achieve net-zero emissions by 2050.

Masdar Raises USD1 Billion to Fund New Global Renewables Projects

In another significant move in the green finance landscape, Masdar, the renewable energy company, raised USD1 billion through its second green bond issuance to fund new greenfield renewable energy projects under its Green Finance Framework. The bond issuance saw demand oversubscribed 4.6 times, reflecting strong investor confidence in Masdar's growth and sustainability credentials.

Masdar plans to raise up to USD3 billion in green bonds to expand its portfolio to 100GW of renewable energy capacity by 2030. Projects financed by Masdar’s 2023 debut USD750 million green bond are expected to mitigate 5.4 million tonnes of GHG emissions annually.

Further reading: https://www.ft.com/content/ee5186f4-1ecb-4f5a-93d2-e4f7ab57a35d, https://www.prnewswire.com/news-releases/masdar-raises-usd1-billion-through-second-green-bond-to-fund-new-global-renewables-projects-302201490.html, https://www.scmp.com/business/markets/article/3270994/hong-kong-government-raises-us32-billion-multicurrency-green-bond