Bonds and Loans: Hong Kong government doubles green bond ambitions citing investor demand

A weekly overview of ESG developments for fixed income

The Hong Kong government plans to double its green bond borrowing ceiling to HK$200bn (€21.6bn) following “overwhelming” market response to previous issuances. The move was announced by Howard Lee, the Deputy Chief Executive of the Hong Kong Monetary Authority in a speech to the Asian Structured Credit Summit.

Public Power Corporation (PPC), a Greek state majority-owned utility, has issued a sustainability-linked high-yield bond. The bond, which has a coupon of 3.875% and matures in 2026, commits the company to reducing its CO2 emissions by 40% by 2022. If it fails to reach the target, investors will be paid a 50bp fee on top of the interest rate. PPC upsized the issuance to €650m from €500m after receiving more than €6bn in bids. HSBC acted as Sustainability Structuring Advisor. 

Agtech SMARTKAS, a Dutch specialist in farming and industrial greenhouses, has mandated Bedford Row Capital to launch a €25m green bond, due to be listed on the Frankfurt Stock Exchange. The bond will have a maturity of 2024, and proceeds will be used to finance five smart farm facilities in London, Monaco, Amsterdam, Munich and Toulouse.

UK aid-funded organisation FSD Africa has signed a partnership agreement with the Committee of South African Development Community Stock Exchanges to support the development of a green bond market in the region. The partnership will allow FSD Africa to support private and sovereign green bond issuance and develop guidelines and regulations for the bonds. The organisation, funded by the UK with a mandate to develop financial markets across sub-Saharan Africa, has previously supported green bond programmes in Kenya and Nigeria. 

Spanish CaixaBank has issued a €1bn green bond to finance projects supporting Sustainable Development Goals 7 (affordable and clean energy) and 9 (industry, innovation and infrastructure). The bond, which matures in 2027 and has a coupon of 1.25%, was three-times oversubscribed. It brings the bank’s total ESG bond issuance to €5bn, having issued two €1bn social bonds and two €1bn green bonds in the past two years.

The World Bank has raised $440m from two sustainable development bond issues in Norwegian and Swedish krone, the proceeds of which will be used to support SDG 3 (health and wellbeing) and SDG 5 (gender equality). The NOK2bn and SEK1.75bn 5-year bonds have yields of 1.319% and 0.313%, respectively. Norwegian investors accounted for 71% of the Norwegian bond, while Swedish investors made up the entirety of the Swedish offering. 

Deutsche Kreditbank has mandated ABN AMRO, BayernLB, Commerzbank, Credit Agricole CIB and UniCredit as Joint Bookrunners on a new green bond. The bank published its updated Green Bond Framework in July 2020 to incorporate the current draft of the EU’s Green Bond Standard. 

Dutch food retailer Ahold Delhaize has issued a €600m sustainability-linked bond. The bond, which has a nine-year term and a coupon of 0.375%, is linked to two KPIs. The retailer will be subject to a coupon adjustment if it does not achieve a 29% reduction in Scope 1 and 2 emissions from its 2018 baseline, and a reduction of food waste by 32% from its 2016 baseline. The second party opinion was provided by Sustainalytics, and JP Morgan and Société Générale acted as structuring agents.

Transition finance could contribute up to $1tn a year to the global economy as an increasing number of sectors enter the market, according to a report from S&P Global. The report says that transition finance offers the largest emitting sectors the opportunity to raise money to decarbonise, but the risk of greenwashing remains a significant challenge.