Climate Bonds Initiative and CCDC jointly publish the second annual China Green Bond Market report, supported by HSBC
Twin Hong Kong and Beijing Launches
2017 see developments in regulation and steps towards achieving harmonised definitions of “green”
5 catalysts to drive market growth towards 2020
What’s it all about?
On Thursday 8th Feb, Climate Bonds Initiative and China Central Depository & Clearing Co. Ltd (CCDC) with the support of HSBC launched the China Green Bond Market 2017 report, in Hong Kong followed by a Friday mainland launch in Beijing.
The new report summarises the major developments that have taken place during the year, focusing on green bond issuance, policy development and wider market growth.
The latest figures show total green bond issuance from China reached USD37.1bn (RMB248.6bn) in 2017, 4.5% up on the previous 2016 record. Of this total, USD22.9bn (RMB 154.3bn) issuance is aligned with international definitions, accounting for 15% of the USD155.5 global green bond record for 2017 and making China the second largest green bond market in the world.
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- 118 green bonds were issued during 2017 (113 onshore, 5 offshore).
- USD37.1bn (RMB248.6bn) green bonds were issued, of which 62%, or USD22.9bn (RMB 154.3bn), aligned with international definitions.
- USD6.01bn (RMB40.2bn) of issuance was Climate Bonds Certified, including the USD2.15bn debut green bond from Industrial & Commercial Bank of China (ICBC) the worlds’ biggest bank.
- The largest cumulative issuer in the year was China Development Bank (CDB) which included a Climate Bonds Certified offshore bond of USD1.67bn (RMB 11.1bn).
Regulatory momentum, green finance developments & harmonisation
Policy support continued with several new developments in 2017, including:
- China Securities Regulatory Commission (CSRC) issued green bond guidelines for Chinese listed companies;
- Green Finance and Ecological Protection were included into the 2017 Government Work Report;
- The Fifth National Financial Work Conference encouraged development of green finance;
- New guidelines for verifiers were released by PBoC and CSRC in December;
- The State Council set up pilot zones in Guangdong, Guizhou, Jiangxi, Zhejiang and Xinjiang to promote green finance;
- Four Ministries, jointly issued ‘Guidance on Promoting Green Belt and Road’, signalling a boost for green infrastructure.
China is also working towards harmonizing local green bond guidelines with those of international markets. In November 2017, China’s Finance Committee, operating with the support of the PBOC, and the EIB launched a White Paper providing an international comparison of several green bond standards. This represents a first step towards achieving harmonised green bond definitions between China and the EU.
Five catalysts for growth
To play its part in reaching the global USD1tn by 2020 milestone, the Chinese market needs to achieve a tenfold growth in green bond issuance in the next three years.
The report outlines five catalysts for growth, including:
- A greener ‘Belt and Road Initiative’
- Increasing green sovereign and sub-sovereign issuance
- Inter-country capital flows supporting green bond market growth
- A growing role for Hong Kong
- A ‘Green Bond Connect’ to help international investors invest in China’s domestic market
Who’s saying what?
Sean Kidney, CEO of Climate Bonds Initiative:
“China’s green bond issuer base is expanding and diversifying, while green bond regulatory frameworks are strengthening, driven by strong policy signals from the government.”
“Already one of the world’s largest green bond markets, increasing inter country capital flows will be one of the catalysts to bring green finance in China to new heights. Acceleration of existing investment levels is pivotal to the country’s low carbon growth path to 2030 and beyond and its impact on international climate targets.”
“Global finance, investors and regulators all have a role in steering green investment towards the USD1tn by 2020 milestone, then higher again. A significant amount of this capital will need to flow to environmental and climate projects in China. With continued efforts around harmonisation and standards the foundations are there for boosting investment.”
Zongjun, Director of Research and Development Department, CCDC:
“In 2017, China issued a series of policies that clearly defined the overarching top-level design of green finance and repeatedly emphasized its ambition to forge ahead the development of green bonds.
“Green bonds have become an important part of China's green finance system and received great attention from parties across different sectors. The China green bond market has grown steadily with issuance making up 22% of the world’s total in 2017. "
"As the core financial infrastructure of China's bond market and a council member of China Green Finance Committee, CCDC has undertaken a lot of groundbreaking and pioneering works in the green bond market, which include the explorative study on green bond identification and classification standard, the release of China's first green bond index and the introduction of the concept of green bond identification and classification." "CCDC has played an active role in enhancing the transparency of China's green bond market, as well as conveying the positive image of green bond issuers and promoting the development of a green economy.”
“CCDC will continue to embrace the concept of green development, support the development of China's green bond market with a more comprehensive and well-established financial infrastructure services, and contribute in promoting the green development in China and the world.”
Helen Wong, Chief Executive, Greater China, HSBC:
“Climate change is an urgent threat to the planet and unprecedented investment is required to finance less carbon-intensive technologies and infrastructure. Green bonds, first launched a decade ago, are now critical to financing a more climate-resilient economy. Green bonds allow an issuer to demonstrate they are proactively preparing for the long-term challenges of global warming. Over the long term, this could well create an advantage in terms of valuation and business prospects, attracting investors with growing demand for assets that align with environmental, social and governance (ESG) principles.”
“A sustainable economy is clearly a policy priority for the Chinese government and an opportunity for businesses and investors. HSBC is committed to bringing together the companies who want to raise capital for sustainable projects with institutions that want to invest in accordance with ESG principles. As an international financial centre and the largest offshore renminbi (RMB) centre, Hong Kong is well-positioned to be the hub for green bonds.”
The Last Word
However, we must look past single years and keep our gaze on achieving the next big milestone: USD1tn in green bond issuance by end 2020.
The Chinese government’s sustained focus on environmental challenges at a central and local level, a continued momentum in regulatory reforms and an increase in cross-border capital flows will play a role in securing the ambitious level of green growth required. As with Brazil, India, Indonesia & other emerging economies, green investment, low carbon development and NDC targets are inextricably linked.
China's progress is also global progress on the 2 degree target. The catalysts for growth outline where that progress will come from.
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‘Till next time,
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