Q: What is a bond?
A: The World Bank defines: a bond is a form of debt security, which is a legal contract for money owed that can be bought and sold between parties. Investors in bonds become creditors of the issuing entity. They are paid a fixed interest rate (coupon) and returned their initial investment (principal) upon maturity. Because bonds typically pay a fixed interest over the maturity period, they are often referred to as fixed-income securities. Once purchased from the issuer, bonds can continue to be trade in the securities market.
Q: What is a green bond and how does it differ from a regular bond?
A: A green bond is a debt security that is issued to raise capital specifically to support climate-related or environmental projects. In early 2014, a group of banks initiated the development of the Green Bond Principles (GBP) – a set of voluntary guidelines framing the issuance of green bonds.
According to the GBP 2018 edition, there are 4 core components: (1) use of proceeds; (2) process for project evaluation and selection; (3) management of proceeds; and (4) reporting.
The GBP recognize several broad categories of potential eligible projects, which include but are not limited to the following:
• renewable energy
• energy efficiency
• pollution prevention and control
• environmentally sustainable management of living natural resources and land use
• terrestrial and aquatic biodiversity conservation
• clean transportation
• sustainable water and wastewater management
• climate chance adaptation • eco-efficient and/or circular economy adapted products, production technologies and processes
• green buildings
Q: Are there any green bonds issued in Hong Kong?
A: Yes. Link Real Estate Investment Trust (Link REIT) issued its first 10 years’ green bond in July 2016, which has successfully raised US$500 million. The second 10 years’ green bond for the amount of US$600 million was issued by MTR Corporation Limited in November 2016.
Q: Did Hong Kong host any important events in relation to green financing?
A: Yes, some CSHK delegates attended the 2018 Green and Social Bond Principles Annual General Meeting and Conference on 14 June 2018, which was co-organised by International Capital Market Association and Hong Kong Monetary Authority. CSHK is also a member of the Hong Kong Green Finance Association. International Bank for Reconstruction and Development / The World Bank, What are Green Bonds? (2015) International Capital Market Association, Green Bond Principles: Voluntary process guidelines for issuing green bonds (2018)
