Hong Kong Boosts Green Bonds Initiative with Blockchain Technology

• Hong Kong allies with leading banks to launch digital green bond sales, driving sustainable financing with blockchain.

• With tokenized green bonds, Hong Kong leads in financial innovation and sustainability, collaborating with entities such as the World Bank by 2024.

Hong Kong, in its drive to become a leader in digital asset finance in Asia, has taken a significant step by incorporating the expertise of five major banks, including HSBC Holdings Plc and Credit Agricole CIB, to lead a series of digital green bond sales.

This initiative reflects the city’s commitment to the integration of advanced financial technologies and sustainable practices, embracing blockchain technology to improve the efficiency and transparency of its financial sector.

Hong Kong and its Commitment to Green Bonds

The government’s decision to engage leading financial institutions such as Bank of China (Hong Kong), Industrial and Commercial Bank of China (Asia) Ltd. and UBS Group AG demonstrates a strong commitment to exploring the potential of digital native green bonds.

These bonds, which will be registered on a distributed ledger technology platform, symbolize a new era in sustainable financing. Moreover, as multi-currency bonds denominated in dollars, euros, offshore yuan and Hong Kong dollars, they reinforce Hong Kong’s intention to attract a global investor base and consolidate its position as a hub for innovative financial solutions.

This move follows Hong Kong’s successful issuance of HK$800 million ($102 million) of 365-day tokenized green notes earlier this year.

The Hong Kong Monetary Authority is leading the Initiative

The Hong Kong Monetary Authority (HKMA) is at the forefront of this initiative, clearly signaling the city’s determination to revitalize its economy through progressive financial strategies.

Eddie Yue, CEO of HKMA, underlined the importance of this initiative at the Hong Kong Economic Summit 2024, stating that Hong Kong needs to be more proactive in pursuing its own development opportunities and injecting momentum into its economy.

Hong Kong Bond Market Overview

The market is divided into three main segments: Hong Kong dollar debt (HKD), offshore renminbi debt (CNH) and Asia G3 international bond issues. At the end of 2022, the total size of bonds issued in HKD was US$169.9 billion, in CNH was US$137.6 billion, and Asian G3 bond issues reached US$716.9 billion.

Hong Kong Dollar Debt Segment (HKD)

There was a slight decrease in new HKD bond issuance in 2022 compared to the previous year, totaling US$115.6 billion. Authorized institutions and foreign issuers outside multilateral development banks were the most active in terms of volume.

Offshore Renminbi Debt Market (CNH)

This segment experienced significant growth, with a 24% increase in new bond issuance, reaching a total of US$99.7 billion in 2022. The increase was mainly due to a boom in the issuance of certificates of deposit.

Asian G3 Bond Market

A considerable contraction was observed in this segment, with a 54% decrease in new bond issuance compared to the previous year, totaling USD 89.2 billion in 2022.

The era of green finance

The remarkable growth of the green bond and loan market in Hong Kong reflects this proactive approach. This particular sector has grown from US$11 billion to more than US$80 billion in just two years, setting a global standard and positioning the city at the forefront of sustainable financial practices.

Green and sustainable debt issued in Hong Kong 2022. Source: HKMA

The upcoming tokenized green bonds represent a novel approach to government digital bond offerings. In addition, Hong Kong plans to organize a “Green Finance Week” with the World Bank’s International Finance Corporation in early 2024.

Hong Kong’s Commitment to Sustainable Growth

Hong Kong’s proactive stance on the use of blockchain technology for green bond issuance is evident and testifies to the city’s commitment to sustainable economic growth and financial innovation .

This initiative not only highlights the successful integration of advanced financial technologies into sustainable practices, but also positions Hong Kong as a leader in the field of green finance and digital innovation globally. With these efforts, Hong Kong firmly establishes itself as a role model in sustainable economic development and financial innovation.