Hong Kong's green bonds are emerging as a crucial mechanism for managing infrastructure expenses, which are anticipated to surge in the coming years. This year, the city has issued approximately $3.9 billion in green bonds to finance various projects, including stadiums and hospitals. For the fiscal year ending in March 2025, there are plans to issue a total of HK$120 billion in green and infrastructure bonds. According to the government's 2023 Green Bond Report, nearly two-thirds of the proceeds from these green bonds have been directed towards construction projects.
Buildings are a major focus area, responsible for approximately 90% of the city's total electricity usage and over 50% of its carbon emissions from electricity generation, as noted by a spokesperson from the Financial Services and the Treasury Bureau. The government plans to cut electricity consumption in commercial buildings by 30%-40% from 2015 levels by 2050 and in residential buildings by 20%-30%, with the goal of reaching half of these targets by 2035.
The boom, which supports Hong Kong’s goal of becoming a global center for sustainable finance, comes as the city embarks on multiple landmark projects. Infrastructure expenditure will reach an annual HK$90 billion in the next five years, according to the latest budget. “It is estimated that expenditure on capital works will start reaching its peak in the next three years”, the city said in the budget.
The government reported a budget deficit of HK$100 billion for the latest fiscal year, the fourth in five years after a property downturn sent revenue from land sales to HK$19.6 billion, the lowest since the global financial crisis. “Given the fiscal condition, it’s impossible for the government to fund all these projects with only the reserves it has right now”, said Gary Ng, an economist at Natixis SA.
According to the 2023 Green Bond Report, nearly 40% of the projected HK$32 billion cost for the Kai Tak Sports Park, one of the city's most expensive new projects, was funded by green bonds as of July last year. Hong Kong has garnered strong interest in the sustainable finance market, with its green bond issuance of approximately HK$25 billion in July attracting orders that were 4.8 times the offering size from institutional investors, reflecting significant demand.
“The Government’s issuances have also established important benchmarks for potential green bond issuers in the region and encouraged best practices in the market”, the spokesman for the Financial Services and the Treasury Bureau said. The city was Asia’s top issuer of sovereign green debt in 2023, raising $14.4 billion which accounted for more than 60% of the region’s total, according to data.