A step-by-step guide to support RMB denominated green bond issuance by foreign issuers
Annual issuance of green bonds globally soared from USD11 billion in 2013 to more than USD161 billion in 2017.
Chinese based issuance has played a big part in this growth, beginning in late 2015 with the Agricultural Bank of China issuing a green bond in London.
Since then the market has grown rapidly. With total issuance of USD60.9bn as of October 2018, China is now the world’s second largest green bond market.
However, these bonds primarily fund domestic assets. So far, only a few green panda bonds have been issued to take advantage of domestic Chinese investor appetite for offshore green assets and opportunities.
The green panda opportunity
China’s green bond market, with clear rules, active market players, and supportive investors and policymakers, offers a great opportunity for foreign green bond issuers.
Green panda bonds could be a source of capital for overseas green bond issuers who are looking to diversify their investor base. Domestic investor appetite for green assets could help fund the investment needs of Latin America’s transition to a low carbon and climate resilient economy.
To support and facilitate international issuers entrance into the Chinese green bonds market, the Climate Bonds Initiative in partnership with the Inter-American Development Bank (IDB) have just published the ‘Green Panda Bond Handbook’.
The Handbook seeks to provide an overview of RMB-denominated green bond (green panda bond) issuance process and facilitate overseas issuers’ participation in the Chinese domestic green bond market.
It provides a step-by-step guide for prospective issuers and an overview of Chinese regulators and actors. Chinese policymakers are keen on facilitating investment in green assets and the Handbook launch is supported by the People’s Bank of China Shanghai.
Shanghai launch event
The 'Green Panda Bond Handbook' launch event, organized by the Inter-American Development Bank, the People’s Bank of China and the Climate Bonds Initiative, held today in Shangai, was aimed at providing opportunities for national development banks as potential green bond issuers from Latin America to showcase their green bond pipelines and attract investment through direct conversations with Chinese investors.
A representative group of National Development Banks from Latin America and the Caribbean, including the Brazilian Development Bank (BNDES) and the National Mexican Bank of External Commerce (BANCOMEXT), have joined other Chinese banks and relevant Chinese green bond market stakeholders on an Issuer-Investor Roundtable, discussing green bond issuance barriers and best practice.
Who’s saying what?
Jin Penghui, Executive Vice-President, People’s Bank of China:
“The launch of this guide and the issuance of Green Panda Bonds demonstrates the efforts of China to fulfil the commitment of opening up the Chinese bond market. China is now vigorously promoting green development, showing its willingness to make a contribution in protecting global environment and resources.
The PBoC has supported the development of the Chinese green bond market and have made great efforts in external cooperation and institutional regulation, striving to create a sound environment for more and better panda bonds to come.
Since its birth, Panda Bonds have been an important tool for cross-border use of RMB. We hope in the future there will be more innovative tools to promote the financial cooperation between China and Latin America.”
Juan Antonio Ketterer, Division Chief – Connectivity, Markets and Finance Division, IDB:
“This has been a very successful meeting that will set the basis for a step up of the green bond markets and contribute to attract more investments in climate projects for the LAC region.
We thank our hosts, the People’s Bank of China, the representatives of the Chinese financial institutions present in the meeting, CBI, and last, but not least, the group of National Development Banks of Latin America and the Caribbean that have joined us for the occasion.”
Sean Kidney, CEO, Climate Bonds Initiative:
“We have worked together with the Inter-American Development Bank on the Green Panda Bond Handbook to provide guidance to international issuers wanting to tap into the booming Chinese green bond market.
The Shanghai launch brought together the People’s Bank of China and other leading Chinese banks, LATAM development banks and potential Chinese investors. All the participants recognise that diversifying green capital flows and developing investment markets between LATAM and China with green panda bonds is an important part of building new climate finance solutions.”
The last word
In order to meet urgent climate action targets, green finance at scale is needed.
China’s green bond market has seen a steady-fast growth since its inception in 2015. Governments and policy makers are incentivizing investment in green assets and investors’ appetite is evident.
LATAM issuers can tap into this market and raise capital for their green projects bringing them one step closer to meeting NDCs and Paris targets.
Learn more about how to issue a green panda bond.
'Till next time,