China issues special green bonds guidelines for listed companies + new China Local Govt green bond policy recommendations
Green finance development continues at corporate and provincial levels
China’s green bond market has begun to heat up since last year, alongside with several supportive policy signals and guidelines by the Chinese government.
The latest move is by the China Securities Regulatory Commission (CSRC), which recently released a new set of Guidelines on the issuance of green bonds by stock exchange listed companies. This is a further expansion of the regulatory framework of the world’s largest green bond market.
Bond Market Regulation
In China, bond market activities are under segregated supervision of regulatory authorities, categorised by issuer types. The CSRC is the regulator overseeing issuance of bonds from listed corporates and corporate asset-backed securities.
In December 2015, the People’s Bank of China (PBoC), China’s central bank, and the National Development and Reform Commission (NDRC), the country’s national policy management agency, published their respective guidelines for green bond issuance in China.
The two sets of guidelines are complementary, as the regulators cover different areas of the bond market: PBoC’s guidelines cover green financial bonds within the inter-bank market (90% of China’s bond market), while NDRC’s guidelines regulate green enterprise bonds.
Both guidelines clarify what projects are considered green, albeit with some differences. (A government statement last year announced that the slightly different regulations would be “harmonised” this year; that will be under the supervision of PBoC).
The CSRC has adopted the green definitions used by PBoC; but they have added the restrictive proviso that “green bond issuers shall not be those who are high polluters or are in industries that conflict with the national industrial planning policy."
That’s a kind of ESG filter over the eligible universe. This is the first time a regulator has done this.
CSRC has a very interested pro-active measure: it specifies that green bonds should be the priority when building connections with overseas stock exchanges. That is useful fillip – expect stock exchange announcements in this area.
Provincial Developments
While regulatory authorities at the central government level have led the way in spurring the development of green bonds in China at the initial stage, some provincial and municipal governments are stepping up efforts to develop green finance, not only to follow political imperatives of the central government, but also out of genuine fundraising needs for infrastructure projects currently in the pipeline.
In early April, Beijing revealed its draft plan for a greener capital in the coming decade. It plans to extend the city’s subway lines to 1,000 kilometres by 2020, almost double the current length of 574 kilometres.
You have to admit, that is incredible! That is what we want from ambitious low-carbon transport planning!
They also aim to achieve minimum of 12.6 percent of commuter journey being on on bicycles by 2030. Yes!
And Beijing is just one of the many cities in China that are embracing such a green transition.
New Local Government and Green Finance Report
On 15 April we released a Study of China’s Local Government Policy Instruments for Green Bonds (中国地方政府绿色债券 激励机制研究) at the Annual Conference of the Green Finance Committee, China Society for Finance & Banking.
The report found that all regions in China, except for the northeast, have issued green bonds in 2016. Most of green bond issuers were headquartered in 14 cities, with Shanghai, Fujian and Beijing ranking as top three for amount issued.
The report was prepared with our China collaborator, SynTao Green Finance, with support from the Green Finance Committee of the China Society for Finance & Banking and from the UK Foreign and Commonwealth Office (FCO).
The report is the most detailed analysis of regional and city based green bond policy and issuance in China produced to date.
Green bond markets face challenges at a regional level, such as lack of specific policy support for green bonds and low awareness of green bond issuance opportunities; but we expect that them to be more readily supported by local governments in future.
With the aim stimulating policy developments that support green bond growth in this in this next level of the market, yhe Policy Paper identifies a number a number of policy steps local governments can take.
Available in Chinese & English
Read the full paper “Study of China’s Local Government Policy Instruments for Green Bonds” (中国地方政府绿色债券 激励机制研究) in Chinese and English.
'Till next time,
Climate Bonds
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