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What to Know About Green Bonds in China


Required Reading- What to Know About Green Bonds in ChinaThe People’s Bank of China (PBOC) recently released official rules on issuing green bonds to support the financing of sustainable solutions for China’s transition to a low-carbon economy.

Green finance will be a crucial component of China’s efforts to tackle pollution and reduce carbon emissions. Ma Jun, chief economist at the PBOC, has said that RMB 2 trillion ($330 billion) will be needed to overcome the country’s environmental challenges between 2015 and 2020, and the government can cover no more than 15% of that. The rest of the money must come from the private sector.

In an article on Chinadialogue, finance expert Chaoni Huang outlines some of the differences between China’s criteria for eligibility and those in other countries. One major difference between the Green Bond Guidelines and international standards is the inclusion of clean coal. The author points out that the guidelines include a periodic disclosure requirement, which should boost confidence among international investors.

“Integrity and transparency are fundamental to ensuring that the environmental and social benefits financed by green bonds are delivered,” the author writes. “Unlike the developed market where voluntary reporting is often adopted, Chinese issuers have yet to incorporate robust measures to demonstrate that finance will flow into eligible green projects.”

The PBOC’s “Green Bond Endorsed Project Catalogue” outlines eligible projects in six categories: energy-saving, pollution prevention, resources saving and recycling, clean transportation, clean energy, and ecological protection and climate change adaptation.

According to Huang, China is poised to become one of the biggest players in the green bond market. Soon after the PBOC announced the new rules, Industrial Bank of China launched the first Chinese green credit asset-backed securitization on, in line with the green bond guidelines. Its value was approximately $401.6 million and it was 2.5 times oversubscribed.

The Paulson Institute has been working on the establishment of a Building Energy Efficiency Fund, announced together with the State Council’s Leading Group of Economics and Finance, which aims to bridge the pricing gap between upfront costs and longer-term returns for clean technologies.

Topics: Green Finance