Building a World Top Green and Sustainable Bond Hub

10 Hong Kong’s Transition Towards a Green and Sustainable Finance Center: Building a World Top Green and Sustainable Bond Hub 2.1 Green Bond is the Most Prominent Instrument for Green Finance Among the suite of financial products and toolbox (Table 1) identified by the G20 Sustainable Finance Working Group, debt instruments are the most prominent. Table 1: Four Major Green Financial Instruments Instrument type Debt instruments Products Use-of-proceeds green bonds/ loans, sustainability-linked loans or bonds, and other debt finance instruments to support green projects. Equity-related instruments Buyout funds, venture capital funds, and mezzanine financing, among other equity investments. Risk mitigation products Insurance, guarantee or other credit enhancement products or blended-finance instruments. Other instruments Asset backed securities, real estate investment trusts, blended finance, and exchange-traded funds. (Source: By the research team adapted from 2022 G20 Sustainable Finance Report) Historically, Europe led the way in sustainable debt issuance, particularly through green bonds. However, the market has diversified, and sustainable debt is now a global phenomenon with a wide range of issuers. The suite of sustainable bonds has also expanded from green bonds to social bonds, sustainability bonds and sustainability-linked bonds (collectively the sustainable bond or GSS+, “+” represents sustainability-linked bonds) with green bonds remaining the major one. According to the City UK, from 2012 to 2021, green bonds accounted for 93% of the total sustainable bond market (Figure 2). They rose from 2.3 billion US dollars in 2012 to 511.5 billion US dollars in 2021, about 200 times in 10 years (Figure 3). The collection of green bonds has played a significant role advancing the development of green finance during this period.