THE Hong Kong Exchange (HKEX) has joined Nasdaq in a very exclusive club of global exchanges that have their own online platforms for promoting sustainable investments, particularly green bonds, amid and post Covid-19.
Interest in these platforms has increased because of the greater need for transparency as investors and issuers attempt to seek out new opportunities for sustainable investments in a market where the traditional methods such as investment roadshows and face-to-face presentations have to be done under the shadow of getting infected by a disease without any cure or vaccine so far.
While the Nasdaq Sustainable Bond Network (NSBN) was launched last December, the HKEX Sustainable and Green Exchange (STAGE) will launch later this year.
The NSBN and STAGE are similar in that they seek to promote greater transparency of sustainable bonds and green bonds by having their issuers list these bonds on their respective platforms. The listing would include information that would be useful for investors such as external review reports, certification requirements, sustainability standards that are used, etc.
By publishing such information both NSBN and STAGE hope to provide the issuers of sustainable bonds with a wider investor base. Investors, on the other hand, will have access to a bigger universe of sustainable bonds that are available for investments.
The difference is that NSBN is, at the moment, focused on the European market, particularly the Nordics, which are admittedly ahead of the rest of the world when it comes to sustainability investment. Since its launch, more than 40 issuers from 10 countries have added over 4,000 bonds to the platform.
Investors that are already on the NSBN platform include Alecta, Allianz Global Investors, APG, and Pimco. Issuers on the platform include Fannie Mae, Freddie Mac, Homes and Community Renewal (of New York), Nordic Investment Bank, and San Francisco Power and Sewer.
On June 17, NSBN added the International Finance Corp (of the World Bank) and the African Development Bank.
“With the outbreak of the Covid-19 pandemic, providing visibility for issuers looking to raise funds to mitigate the effects has become even more important,” says Ann-Charlotte Eliasson, head of European debt listings and sustainable bonds at Nasdaq. “We are glad to see the interest in the platform continue to grow among both issuers and investors and look forward to expanding the offering with new functionality in the near future.”
STAGE, on the other hand, is looking to include the 44 green bonds and two green exchange-traded funds (ETFs) that are already listed on HKEX to be the core members of the platform.
What will make STAGE different is that it hopes to eventually expand beyond sustainable bonds to sustainability-linked equities, derivatives, loans, and asset-backed securities.
“We’re successful in terms of equities and other products like derivatives. So, we want to do green financing in areas more than bonds. That’s our ambition. We want to bring in more products and more indices that are in the green financing area onto the exchange,” says Grace Hui, HKEX head of green and sustainable finance. “So, the STAGE platform will hopefully grow into more than just bonds and we will have other products such as green asset-backed securities.”
Also, HKEX plans to use the STAGE platform for market advocacy to promote sustainability investing.
“We want to encourage dialogue and we also want to educate both the investors and issuers. I think the retail investors, which is a market we have here in exchanges, may not yet appreciate the benefit of ESG investments so we need to educate these investors. We may also be able to see other innovative financing solutions in this area which we can also bring on to this exchange, and we can share that with the issuers by putting information onto this platform,” Hui says.