Alexandra Tracy, Green Finance Advisor of Friends of the Earth (HK)
In the midst of the enormous credit boom around the world, fuelled by the coronavirus panic, green bond markets have been largely closed for business from new issuers. As a response to the virus, several governments and multilaterals have issued social bonds, but choice for investors has been limited.
Happily, green bond sales are now rebounding in Europe. Six companies have launched bonds this month, including Credit Suisse Group, E.On and Swisscom, while Belgian waste water company, Aquafin, is expected to follow soon.
Secondary trading (bonds already out in the market) has held up better, with demand for green bonds holding firm, even among the dramatic sell off seen in recent weeks. There are very few green issues so far from corporates which have particularly suffered in the downturn – such as the oil and gas or consumer sectors – which has helped the asset class as a whole.
Hong Kong’s green bond market was doing quite nicely before the coronavirus hit. Hong Kong issuers raised a total of HK$20 billion during 2019, with companies coming to market including both financial and non-financial corporates. The Hong Kong government was also a major participant, launching the first tranche of its HK$100 billion sovereign green bond programme.
It is to be hoped that Hong Kong will resume its activity in this space as markets settle. As well as being a centre for banks, multilaterals and blue chip corporates to raise funds, the expertise we have locally should enable Hong Kong to be a centre of innovation in the green bond sector. Using the financial markets to refinance and recycle capital, especially for smaller businesses, will be essential to accelerating the flow of funding to green activities. And moving away from “vanilla green” bonds to more diversified products, such as project, resilience and transition bonds may attract both new investors and more varied issuers. Hong Kong can lead the way.