HKMA announces details of the Green and Sustainable Finance Grant Scheme

General bond issuance costs 

The subsidy for general bond issuance costs only applies where:

• the bond issuer has not issued green and sustainable bonds in Hong Kong in the rolling five-year period prior to the bond's pricing date; and
• the issue satisfies the criteria set out in the column "Track I – Bonds" above.

External review costs 

The external review cost subsidy applies to both first-time and repeated issuers and borrowers of green and sustainable bonds and loans. 

A bond issue is eligible if it satisfies the above criteria for general issuance cost subsidy (except that the minimum issue size is HK$200 million (or equivalent)). 

For a loan to be eligible, pre-issuance external review services have to be procured, the loan has to be issued in Hong Kong and the loan must have a size of at least HK$200 million (or equivalent).

Comparing with existing schemes

The GSF Grant Scheme is intended to be a consolidation of the Pilot Bond Grant Scheme and the Green Bond Grant Scheme which will expire in mid-2021. The eligibility criteria and grant amount applicable to these schemes are similar except that:

• the external review cost track of the GSF Grant Scheme extends to loans; 
• the minimum issue size to qualify for external review cost subsidy has been reduced from HK$500 million (under the Green Bond Grant Scheme) to HK$200 million; 
• although strong Hong Kong nexus is required under all schemes, the GSF Grant Scheme defines issuance in Hong Kong as:
  • in the case of bonds, where half or more of the lead arrangers are recognised arrangers (being arrangers with substantial Hong Kong debt capital market operations, as determined by the HKMA); and 
  • in the case of loans, where at least half of the loan amount is borrowed from Hong Kong-based lenders; and
• under the GSF Grant Scheme, external review can be conducted by a wider range of external reviewers (to be recognised by the HKMA). The existing Green Bond Grant Scheme only applies to bonds with certification from the Hong Kong Quality Assurance Agency under its Green Finance Certification Scheme.

Next steps

The GSF Grant Scheme defrays the expenses incurred by issuers and borrowers looking to access the green finance market and provides an incentive for them to transition towards green and sustainable finance practices. Issuers/borrowers and arrangers may submit a pre-application consultation to the HKMA with formal application to follow post-completion. Interested arrangers and external reviewers may also apply for recognised arranger and recognised external reviewer status (which will be valid for one year) before being engaged in a transaction so that they are in a position to enable their clients to take part in the scheme when the opportunity arises. 

_{1. CMU denotes Central Moneymarkets Unit operated by the HKMA and SEHK denotes The Stock Exchange of Hong Kong Limited}

Thank you to Susana Chan for her contribution to this article.