Green Bond & Green Loan

What is Green Bond?

Project Examples:

Renewable Energy Generation

Waste Reduction

Carbon Reduction

Pollution Control

Guidance – Green Bond Principle
  • Internationally recognized voluntary process guidelines
  • Recommend transparency and disclosure
  • For Issuer – Provide concrete framework and guideline on green bond issuance
  • For Investor – Promote information availability for green bond investment evaluation
  • With 4 main components:
    1. Use of Proceeds
      • The bond proceeds should be used on green projects, such as: renewable energy, energy efficiency, pollution control, clean transportation and so on.
    2. Process for Project Evaluation and Selection
      • Green bond issuer should advise the following information to investors:
        • Environmental sustainability objectives
        • The process of issuer determines how the project is classified as a green project
        • Any related eligibility criteria, such as exclusion criteria or process applied to identify or manage potential environmental and social risks
    3. Management of Proceeds
      • The net proceeds of green bond should be credited to a sub-account or can be tracked by the issuer in an appropriate manner
      • Suggest to engage auditor or other third party to verify the internal tracking method and fund allocation
    4. Reporting
      1. Issuer should make and keep readily available and up-to-date information on the use of proceeds
      2. The information should be renewed annually

Benefits of Green Bond
  • Mobilize projects with positive environmental and climate benefits
  • Provide opportunities for potential investors to access green projects
  • Enable more capital-raising and investments to green projects
  • Promote green technology

Case Studies:
Swire Properties
Issuance Size: US$500 million
Tenor: 10 years (2018-2028)
Coupon Rate: 3.5%

Use of Proceeds:

  1. Renewable Energy Projects
  2. Energy Efficiency Projects
  3. Sustainable Water and Wastewater Management Projects
  4. Climate Change Adaptation Projects
  5. Green Building Projects

New World Development
Issuance Size: US$310 million
Tenor: 5 years (2018-2023)
Coupon Rate: 4.75%

Use of Proceeds:

  1. Green Building Projects
    • New World Zengcheng Comprehensive Development Project
    • Qianhai CTF Finance Tower

MTR Corporation
Issuance Size: US$1.2 billion
Tenor: 10 years (2020-2030)
Coupon Rate: 1.625%

Use of Proceeds:

  1. Energy Efficiency Projects
  2. Enhance Railway Services
  3. Conserve Nature

Sinic Holdings
Issuance Size: US$250 million
Tenor: 1 year (2021-2022)
Coupon Rate: 8.5%

Use of Proceeds:

  1. Green Building Projects
  2. Energy Efficiency Projects
  3. Pollution Prevention and Control
  4. Renewable Energy
  5. Environmentally Sustainable Management of Living Natural Resources and Land Use
  6. Clean Transportation

What is Green Loan?

A type of loan instrument that is used to finance or re-finance eligible green projects

Guidance - Green Loan Principle
  • Internationally recognized voluntary issuance guidelines
  • Can be applied on a deal-by-deal basis
  • With 4 main components which is the same as Green Bond Principle:
    1. Use of Proceeds
    2. Process for Project Evaluation and Selection
    3. Management of Proceeds
    4. Reporting

Benefits of Green Loan
  • Enhancement of sustainability management
  • Promoting green projects and resolve environmental issues
  • Raising funds on relatively favorable terms

Green Loan Assessment – Green Loan e-Assessment (launched by HKQAA)
  • Purpose: For companies to conduct green assessments to prove their loan projects have:
    1. Green nature
    2. Conducted environmental impact reporting
  • Assessment Criteria:
    1. Proceeds of the Loan are clearly defined for the use of Green Projects;
    2. Project nature can match with the Use of Proceeds of Green Loan Principles and Sustainable Development Goals;
    3. Select key indicators for environmental impact and prepare for data collection
  • Assessment Types:

    Assessment Type Initial Assessment Surveillance Assessment
    Focus If the Loan has green nature If the Loan has conducted environmental impact reporting
    Result Green Nature
    (Green or Non-Green)
    Green Type
    (AAA | AA | A | BBB | Unclassified)

Case Studies:
Borrower: Sweetheart Garden Restaurant
Lender: Bank of China (Hong Kong) Limited
Use of Proceeds: Shop renovation – Installing energy-saving lamps and air-conditioning system
Borrower: Xinyi Glass Holdings Limited
Lender: DBS Bank (Hong Kong) Limited
Use of Proceeds: Investing in comprehensive green production and products

Green Bond and Green Loan Comparison
Green Loans Green Bonds
Usually from Financial Institutes Usually from Investor Markets
Flexible interest rates Fixed interest rates
Repay principal periodically Repay principal on maturity
Lenders cannot demand early repayment if loan term has not been agreed Investors can trade their Green Bonds before maturity