ING advises HKMC on incorporation of sustainability into its inaugural infrastructure securitisation in Hong Kong

Hong Kong, 30 May 2023 – ING announced today the closing of The Hong Kong Mortgage Corporation Limited’s (HKMC) inaugural infrastructure loan-backed securities (ILBS) issuance – Bauhinia ILBS 1 Limited (Bauhinia 1). ING acted as Joint Global Coordinator, Joint Bookrunner and Joint Lead Manager for the US$404.8 million transaction, which issued five classes of notes, including a dedicated sustainability tranche with ING acting as the sole Sustainable Finance Adviser.

Bauhinia 1 is backed by a diversified pool of 35 infrastructure and project finance loans, across various sectors and geographies. The transaction marks an important milestone in HKMC’s long-term objective to develop an infrastructure securitisation platform, as stated in the Hong Kong 2022-23 Budget.

Bauhinia 1 complements multiple objectives within HKMC’s mandate, including the development of Hong Kong’s debt capital market landscape and consolidating Hong Kong’s position as an infrastructure financing hub.

Anju Abrol, CEO and head of Wholesale Banking, ING APAC, said: “This is a first-of-its-kind transaction for HKMC, and ING is delighted to assist by providing its market-leading expertise in the infrastructure securitisation space. As the first public securitisation in Hong Kong since the Covid-19 pandemic, the transaction will strengthen the local securitisation markets, and will see HKMC join a select group of infrastructure securitisation issuers globally.”

Andrew Chew, director of Sustainable Finance, ING APAC said: “Bauhinia 1’s significant volume of sustainable assets enabled us to structure a sustainability tranche to cater to the booming demand from bond investors, which manifested into a tangible, quantifiable price benefit of ‘greenium’ of 10bps for the issuer. We are confident this sustainability transaction and its associated greenium will serve as the benchmark for future sustainability bond issuances in the Asia-Pacific region.”

Bauhinia 1 is also notable for its use of a pre-issuance impact report that quantifies the environmental and social benefits associated with the relevant projects. ING advanced the timeline of the report to enable prospective investors to evaluate the broader environmental and social impact of their investments, beyond the traditional factors of risk and reward. The quantification of impact through the pre-issuance impact report heralds a paradigm shift in the region’s sustainability bond issuance best practices.

There is a significant need for infrastructure investments both globally and within APAC, with the Asian Infrastructure Investment Bank currently estimating the infrastructure financing gap at US$26 trillion through 2030. Similarly, to achieve net-zero CO2 emissions by 2050, the IEA’s May 2021 report estimates the required annual investment in energy to be between US$2 to 5 trillion per year this decade, amounts that exceed the capacities of traditional financing mechanisms.

Through pioneering transactions such as Bauhinia 1, private institutional capital will be mobilised to deal with the urgent challenges of climate change, social inequality, and the infrastructure financing gap.

ING is recognised as a sustainable finance pioneer and continues to help its clients transition to a more sustainable way of doing business. Since launching the world’s first sustainability-linked loan (SLL) in April 2017, ING has launched other innovative solutions to steer our financing towards meeting global climate goals. In 2022, ING achieved a volume of over €100 billion in sustainable finance mobilised globally, which puts the bank well on its way towards the goal of €125 billion annually by 2025.

Society is transitioning to a low-carbon economy. So are our clients, and so is ING. We finance a lot of sustainable activities, but we still finance more that’s not. See how we’re progressing on Opens in a new tabing.com/climate.