October 2023

Client engagement | Client story

A reference index for
China’s offshore green
bond market“When looking for a partner to develop a green bond index, FTSE Russell’slong-standing experience in building sustainable indices was attractive for us.
We also valued FTSE Russell’s ability to customise a green bond index to meet
our requirements, while adhering to global standards.”
Gabriel Yu, Portfolio Manager, Ping An of China Asset Management (Hong Kong) Company Limited

About the client
ProfileObjectivesSolution

Ping An of China Asset Management(Hong Kong) Company Limited (“PAAMC(HK)”) is the overseas investments andasset management platform of Ping AnGroup.

PAAMC (HK) required a newreference index, aligned with global
standards, for its investments in therapidly growing Chinese offshore
green bond market.

The FTSE APAC-Select InvestmentGrade Green Impact USD Bond Index
helped PAAMC (HK) benchmark thereturns of the Chinese and Asianinvestment grade offshore green bondmarket.

Client engagement | Client story

Client Profile
Ping An Insurance (Group) Company of China, Ltd. (“Ping An”) is a world-leading
integrated finance and healthcare services provider. In 2022, Ping An ranked 25thin the Fortune Global 500 list (an annual ranking of the world’s top 500 companiesby revenue) as well as 4th among global financial services companies 1.
Ping An has committed to becoming carbon-neutral at the operational level by 2030
and at the asset level by 2060, in line with China's green transition targets. Theseaim to achieve a peak in the country’s greenhouse gas emissions by 2030 andcarbon neutrality by 2060.
In 2019, Ping An became a signatory to the United Nations-supported Principles forResponsible Investment (UN PRI), the first asset owner in mainland China to do so.
In 2019, Ping An also became the first Chinese asset owner to join Climate Action
100+, an investor initiative to ensure the world's largest corporate greenhouse gas
emitters take necessary action on climate change.
Ping An of China Asset Management (Hong Kong) Company Limited (“PAAMC(HK)”) is the overseas investments and asset management platform of Ping An
Group. PAAMC (HK) offers investment products, asset management and consulting
services, including open- and closed-end funds, ETFs and mandates in equity, fixedincome, hedge funds, AI and quantitative investments, as well as other alternative
investments.

The FTSE APAC-SelectInvestment-Grade Green Impact
USD Bond index
is a custom index based on the FTSE
Green Impact Bond index series.
It has been designed to ensure thatgreen bonds issued by entities inGreater China (defined as China,Macau, Hong Kong, and Taiwan) will
make up no less than 60% of the index
by market value weight. The remaining
green bonds are issued by entities inthe Asia-Pacific region.
The index includes bonds issued byinvestment-grade entities only and issubject to minimum issue size, liquidityand diversification constraints.

Client Objectives
The transition to a sustainable global economy requires an increase in the provisionof finance to projects that deliver positive outcomes for the environment andsociety.
The bond market plays a critical role in attracting and directing private capital
towards such outcomes and so-called ‘green bonds’ are a type of bond designed toproduce a measurable and positive climate or environmental impact.
Since the first green bonds were issued in 2007, the market has grown to nearly
US$2.5trn in aggregate issuance. Within this total, China is playing an increasingly
important role, with the country issuing more green bonds in 2022 than any othernational economy. China’s green bond market includes both bonds issued
domestically (in yuan) and those issued offshore (in foreign currency).

1

https://fortune.com/company/ping-an-insurance/global500/

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Client engagement | Client story

Growth of the green bond market

Source: Refinitiv, as of March 2023

In 2022, PAAMC (HK) wished to appoint a new reference index provider for its
range of green bond funds and products. It set the following requirements for theprovider:••••

Experience—the reference index provider should have long-standing
experience in offering and managing sustainable investment indices;
Representativeness—the index provider should have access to and the ability
to price all components of the China green bond market;
Alignment—the index methodology should be aligned with key global standards
for the green bond market, such as the Climate Bonds Initiative’s Climate Bonds
Standard (CBS) and the International Capital Market Association’s (ICMA’s)
Green Bond Principles (GBP);
Ability to customise—the provider should offer PAAMC (HK) the ability tocustomise the index, for example by setting constraints for geographical focus,
credit rating, currency of issue, liquidity and minimum diversification.

Solution
PAAMC (HK) decided to select the FTSE APAC-Select Investment-Grade Green
Impact USD Bond index as a reference index for its investments in Chinese andAsian green bonds.
This index is part of the FTSE Green Impact Bond index series, which provides acomprehensive measure of the global green bond market across fixed income asset
classes and credit sectors.
The index series measures the performance of both investment-grade and highyield multi-currency green debt issued by governments, government-sponsoredentities, supranational institutions, collateralised bond issuers and corporations.
A bond is eligible for the index series if its issuance proceeds are earmarked for
projects that have an environmental and/or climate benefit and it has been labelled
as ‘green’ by the Climate Bonds Initiative (CBI) and is aligned with the International
Capital Markets Association’s (ICMA) Green Bond Principles (GBP).
Under the CBI taxonomy and the GBP, four core components ensure thetransparency and governance of green bond issuance:•Use of proceeds—the issuance proceeds of a green bond must achieve
specific environmental objectives, such as climate change mitigation or pollution
prevention and control;

FTSE Russell

3Client engagement | Client story•••

Process for project evaluation and selection—an issuer’s process for projectand selection should be supplemented by an external review;
Management of proceeds—issuers should verify the internal tracking processand the allocation of funds from the bond issue;
Reporting—the annual report should include projects to which green bondproceeds have been allocated, the amounts and expected impact.

Four-pillar requirements for a green bond issue

Additional information
For more on the FTSE Impact Bondindex series, click here. For more on
the FTSE Green Impact Bond index
series, click here. For more on theFTSE Ping An China ESG (equity)
index series, click here.
Details of all FTSE Russell products
and services are available at ourwebsite, ftserussell.com

As well as complying with these design features of the FTSE Green Impact Bondindex series, PAAMC (HK)’s chosen green bond reference index (the FTSE APACSelect Investment-Grade Green Impact USD Bond index) also met specific criteria,including:••••Geographical focus—Greater China, defined to be mainland China, Macau,
Hong Kong, and Taiwan, will make up no less than 60% of the index by market
value weight, with 40% of the index represented by green bonds from other
Asian markets (India, Indonesia, South Korea, New Zealand, Philippines,Vietnam, Singapore, Pakistan, Australia, Malaysia and Thailand);Credit rating—the index only includes bonds with an investment-grade credit
rating (BBB- or above);
Currency—only USD-denominated green bonds are included;
Liquidity and diversification—the minimum green bond issue size for index
inclusion is $300m and individual issuers’ index weights are capped at 7%.

PAAMC (HK) is now using the FTSE APAC-Select Investment-Grade Green Impact
USD Bond index in client reporting, risk management and internal performance
attribution.

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ABOUT FTSE RUSSELL
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