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posted 2 years ago
By Rossana Chu:
It has been one year since the launch of the Green and Sustainable Finance Grant Scheme (Scheme) in May 2021[1]. The Hong Kong Monetary Authority (HKMA) announced in its Quarterly Bulletin of March 2022[2] that more than 60 debt instruments had been approved under the Scheme. This article summarizes the core elements of the Scheme and provides tips for applications.
Grant and eligibility of the Scheme
The Scheme consists of two tracks[3]:
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Track I |
Track II |
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Finance instruments |
Eligible green and sustainable bonds |
Eligible green and sustainable bonds and loans |
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||
Applicants |
First-time bond issuers |
First-time and repeated bond issuers and loan borrowers |
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Eligible expenses covered by the grant under the Scheme |
Bond issuance expenses, including arrangement, legal, audit, rating, listing and clearing fees |
Only expenses of transaction-related external reviews:
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Grant amount |
50% of the eligible expenses, up to (i) HK$2.5 million where the bond, issuer or guarantor possesses a credit rating by a recognised rating agency, or (ii) otherwise, HK$1.25 million |
100% of the eligible expenses, up to HK$800,000 |
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Key eligibility criteria |
|
|
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There are currently 14 external reviewers (including Ernst & Young) recognised by HKMA[4].
A few tips
Because a pre-issuance external review is mandatory in either track, it is advisable for any applicant to consult a recognized external reviewer. The core references adopted by reviewers may include:
It is essential for the issuer/borrower to formulate the relevant bond/loan framework in line with the ICMA Bond Principles or LMA Loan Principles. The core elements of the framework should at least include:
Please refer to our earlier article for more details of such 4 elements[5].
HKMA does not require the eligible projects must be in Hong Kong or the proceeds must be used in Hong Kong.
Eligibility conditions are imposed on bond arrangers, loan lenders and external reviewers, but the Scheme does not require that the issuer/borrower must be a Hong Kong company.
Prior to or after the issuance of the bond/loan, it is desirable to consult the HKMA before submitting the formal application. The HKMA may indicate no-objection to the pre-application consultation if it is satisfied that, based on the preliminary information provided, the Scheme eligibility requirements are met.
A formal application may be made within 3 months after the bond/loan is issued. The HKMA processes applications in monthly batches.
Download (pdf)
Note: This material has been prepared for general information purposes only and is not intended to be relied upon as professional advice for any cases. Should you need further information or legal advice, please contact us.
_____________________________________________________________
[1] https://www.hkma.gov.hk/eng/news-and-media/press-releases/2021/05/20210504-4/
[2] https://www.hkma.gov.hk/media/eng/publication-and-research/quarterly-bulletin/qb202203/fa1.pdf
[3] https://www.hkma.gov.hk/media/eng/doc/key-information/press-release/2021/20210504e4a1.pdf
[4] https://www.hkma.gov.hk/eng/key-functions/international-financial-centre/bond-market-development/tax-concessions-and-incentive-schemes/
[5] https://www.eylaw.com.hk/en_hk/publications/our-latest-thinking/2022/may/principles
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