China's first green bond to spur interest for future deals


  • Business
  • Monday, 20 Jul 2015

HONG KONG: China's first green bond has raised US$300mil after pricing last week, as the world's largest emitter of greenhouse gases seeks new funding sources to help raise about US$1.6 trillion over five years to help fix its environmental problems.

China is scrambling to lift environmental standards in a country where only eight out of 74 cities met air quality minimum standards and only 25% of drinking water achieved national quality standards, according to latest government data.

Green bonds are certified to show that funds raised will be used for environmental projects and are a popular tool for socially responsible investment. For issuers, they can offer a new investor base to raise funds.

"We see activity around green bonds in a number of different places, but signals out of China are very strong," said New York-based Manuel Lewin, head of responsible investment for Zurich Insurance Group.

Wind energy firm Xinjiang Goldwind Science & Technology said it will use proceeds from the first green bond issue for general working capital and refinancing purposes for its group companies. The US$300mil deal received orders of US$1.4bil.

China's debut green bond comes at a time when the country is opening up its debt markets to global investors. Earlier this month, China relaxed rules for some long-term foreign investors to participate in its interbank market.

A taskforce under the leadership of the People's Bank of China has recommended setting up a green financial system to help contain the cost of pollution.

Currently, about 70% of the US$200bil China spends each year on environment-related projects come from loans made mainly by state-owned banks, some with implicit government backing. Analysts say, private sector investment is needed to meet China's new ambitious targets.

The task force estimates that achieving environmental goals under the five-year plan over 2016-2020 would require an annual investment of at least US$320bil.
"From an environmental point of view, China would be able to make very good use of green bonds as a financial tool," said Beijia Ma, London-based BofA Merrill Lynch strategist.

Global issuance of green bonds has flattened after tripling last year. Investors see more issuance in China, although it was too early to predict the pace of growth.

"The emergence of green bonds in China will initially not raise extra money but different money," said Simon Zadek, senior fellow at the Global Green Growth Institute. - Reuters

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