China Green Bond Market Newsletter H1 2019中国绿色债券市场季报 2019 上半年度
January-June 2019/2019 年 1 月 6 月

Market overview
At a glance

Green bond market boom in H1 2019
Both China and global green bond markets were active in the past
six months. The total amount of global green bonds that are alignedwith international definitions reached USD117.8bn in H1 - an 48%
increase from the same period last year.

Total H1 Chinese issuance: USD21.8bn/RMB143.9bn
Onshore issuance: USD18.6bn/RMB125.2bn

USD Billions

Offshore issuance: USD3.2bn/RMB18.7bn
80Issuance that meets international definitions:
USD10.7bn/CNY71.8bn

60

Largest issuer: ICBC at USD2.7bn

40

Certified Climate Bond: Jiangsu Financial Leasing

20

Largest issuing sector: Low Carbon Transport
0
Q1

Q2

Q3

Q4

Q1

Q2

2018
2019
China issuance on pending list
China issuance not aligned with international definition
China issuance aligned with international definition
Global issuance aligned with international definitions (except. China)

Chinese green bond market saw a 62% surge in H1 2019
The USD21.8bn worth of green bonds from China represent a 62%
surge year-on-year. However, only 49% (or USD10.7bn) of H1
volume from Chinese issuers is in line with international green bonddefinitions. Another 49% has been excluded in accordance with CBIGreen Bond Database Methodology.
The first Certified Climate Bond from China’s domestic market

Proceeds for general use remains primary reason for exclusion
By amount issued, 70% of the overall excluded bonds in H1 fail tomeet best practice as they allocate more than 5% of proceeds togeneral corporate purposes, not necessarily linked to green assets or
projects. For example, MLS Co. Ltd. allocated 50% of bond proceeds
to finance eligible LED manufacturing, while using the rest to
supplement general corporate working capital.
28% was excluded for projects that are not in line with international
green definitions. For example, ‘replacing the small coal poweredplants with the bigger ones’ is eligible in China’s local context, but is
not considered as green by international investors. The remaining 2%
fail to provide sufficient information.

Closed in April, the CNY1bn (USD148.9m) deal from Jiangsu
Financial Leasing became the first Certified Climate Bond issued
domestically (see more on page 4). CCX is the verifier of this deal.
Jiangsu Financial Leasing provides loans to a range of businesses in
China. International Finance Corporation (IFC) is one of its
shareholders and has provided the impetus for the Issuer to apply
for Certification under the Climate Bonds Standard. It is also thefirst Certified Climate Bond to support floating solar farms on
freshwater bodies.
There are 5 deals on the Pending list, and they account for 2%(USD395.3m) of H1 issuance. These include green ABS from each of
Geely Technology Group, Fujian Zhangzhou Long-distanceTransportation Group and Shenzhen Guofubaoli/Guofu Factoring,where neither the collateral nor proceeds allocation disclosure issufficient for us to determine alignment.
The private placement deal from Chongqing Nanzhou Water(Group) is also in the pending list due to the limited information on
use of proceeds. Further analysis is needed for Bank of Liuzhou as
funds raised by its green bond might be linked to a fossil fuel-based
CHP project.

China Green Bond Market Newsletter H1 2019 Climate Bonds Initiative

2%
28%

Working capital/General needs
Not aligned
70%

Insufficient information

Green bonds on Pending list
In some cases, use of proceeds details are not available atissuance. Thus we cannot make an immediate judgement on
the green credentials of the bond, the bond is marked as
Pending and further research is needed. The investigation
process is carried out by the end of the next quarter. If nofurther information is made available or the information
obtained does not show alignment with taxonomy, the bond is
added to the excluded bond list.

1Most Chinese green bonds are issued domestically

Low Carbon Transport remains the dominant theme

In H1 2019, 85% of all Chinese issuance was issued domestically.
Specifically, 48% were placed on the China Interbank Bond Market,
followed by listing on Shanghai Stock Exchange with USD7.12bn(CNY47.88bn), or 33% of the H1 total. The remaining 4% were listedon the Shenzhen Stock Exchange.

By Climate Bonds definition, Low Carbon Transport has been thelargest climate sector since Q4 2018, representing 37% of total issued
volume in H1 followed by Renewable Energy (26%) and Water (20%).

Singapore Stock Exchange (SGX) was the most popular offshore
venue, where both ICBC’s 3-tranche green bond and Rongshi
International Finance’s inaugural deal were listed.
Shenzhen
Stock
Exchange
4%

Shanghai Stock Exchange
33%
Offshore Onshore
15%85%

China Interbank Bond
Market48%

Transport: In addition to dedicated regional railway and urban transit
operators such as Guangzhou Metro, Chengdu Rail Transit, Sichuan
Railway Investment, and Nanjing Metro who have brought a total of
USD1.9bn green bonds, commercial banks have also contributed tothe sector with USD1.6bn worth of proceeds allocated to passenger
rail and metro line projects. ICBC, Bank of Jiangsu, and Guangdong
Nanhai Rural Commercial Banks are among the largest issuers.
Energy: ICBC, with a third of its USD2.7bn overseas deals allocated torenewable energy, ranked the largest issuer in the climate sector.
However, ABC Financial Leasing and Jiangsu Financial Leasing are the
top issuers in China’s domestic market, using green bond proceeds topurchase solar and wind equipment for leasing.
Water: Rongshi International Finance joined the market in Q2. As afinancing vehicle of State Development & Investment Corporation,
Rongshi’s USD500m deal listed on SGX is going to finance forsustainable water and wastewater management projects.
4%

USD Billions

Financial corporates were active issuers

Energy

35

10%

30

26%

Buildings
Transport

25

20%

3%

20

Water
Waste

15

37%

10

Unallocated A&R

5
0
H1

H2
2017

H1

H2
2018

H1
2019

Financial corporate

Non-financial corporate

Policy Bank

Government-backed entity

According to China’s local green bond definitions, the top three
categories are Clean Energy at USD6.2bn, Clean Transport at
USD5.1bn, and Pollution Prevention and Control at USD3.1bn.

ABSFinancial corporates remained the largest issuer type with 41%(USD8.9bn) of the overall issuance in H1. This is mainly due to ICBC
Singapore’s three-tranche deal (EUR500m, CNY1bn, USD1.5bn) andBank of Jiangsu (CNY10bn/USD1.49bn).
Non-financial corporate is the 2nd largest issuer type with 34% of thetotal issued amount, up 6% from H1 2018. 28 issuers have broughta total of USD7.4bn worth of green bonds, but only 8.6%
(USD640m) is aligned with CBI green definition, mainly due to large
proportion of proceeds being earmarked for working capital.
Issuance from government-backed entities totalled USD2.7bn,
accounting for 12.3% of the H1 total. All the 15 issuers are local
government financing vehicles (LGFVs). Except for Huzhou
Municipal Construction Investment Group as a LGFV of aprefectural-level city, all the others are backed by provinces orprovincial-level cities.
The 12 green ABS deals in H1 accounts for 12.5% (USD 2.7bn) of thetotal, and reached the highest share in a quarterly volume,
excluding the three ABS deals still on the Pending list. Collateraltypes further expanded as two leasing companies joining themarket with deals backed by lease receivables.

China Green Bond Market Newsletter H1 2019 Climate Bonds Initiative2

74% of all issuance carries an external review

EY and CICERO reviewed 40% of H1 issuance by volume

EY was the largest external reviewer in H1 with 27% market share.
CICERO ranks 2nd with USD2.2bn worth of green bonds issued fromthe Singapore branch of ICBC and a green loan made by the bankunder the same framework. Lianhe Equator, China Bond Rating and
CCX made their way into the top 5 external reviewers. 26% of green
bonds did not carry any form of external review. Most of thesewere NDRC-regulated green bonds.

Top 3 regions: Guangdong, Shandong and Jiangsu
There are noticeable clusters in terms of issuance. East China (ledby Jiangsu, Jiangxi, Zhejiang), Central North China (led by Shandong,
Beijing, Hebei), as well as Guangdong province in South China andSichuan province in Central West China dominate volumes.
Guangdong, Shandong and Jiangsu provinces rank at the top with
USD1.8bn (75% increase over H1 2018), USD0.8bn (+157%) and
USD 0.7bn (-7%) respectively.

EY
CICERO

26%

27%

Lianhe Equator
China Bond Rating
CCX

5%

CECEP

3%
4%

13%
7%

7%

8%

The iGreenBank
OthersN.A

Green bond proceeds allocation of the top 20 aligned issuers
EnergyBuildings

Transport

Water

Waste

Unallocated A&R

100%
80%
60%
40%
20%
0%

News and events
Shenzhen city to release green fund standards in 2020

Launch of CSI-Zhongcai Shanghai and Shenzhen 100 ESG Leading Index

At the Sustainable Finance Forum held in Shenzhen on 14th July, thepresident of China Emissions Exchange, Ge Xing'an, revealed that Shenzhen
is developing green finance sub-standards, including green funds andcarbon finance products, environmental equity products, green guarantees
and environmental information disclosure, etc., of which the green fundstandard has been drafted and may be officially released next year.

The new ESG index will create a localised assessment system, making up
for some of the shortcomings in the existing ESG assessment
methodology for Chinese shares. Internationally, as Chinese A-shares
have been included in the MSCI Emerging Market Index and thus gained
wider, more direct exposure in portfolios, the new CSI-Zhongcai Shanghai
Shenzhen 100 ESG Leading Index will work as a potential verification toolfor ESG conscious investors.

China to open up finance sector to more foreign investment in 2020
According to a statement released by Financial Stability and Development
Committee on 23rd July, shareholding limits on foreign ownership ofsecurities, insurance and fund management firms will be removed in 2020.
Foreign investors will be encouraged to set up wealth management firms,
currency brokerages and pension management companies.
Foreign-owned credit rating agencies will also be allowed to evaluate agreater number of bond and debt types, the statement said. The
announcement signals accelerated inter-country green capital flows
between China and the rest of the world.

China Green Bond Market Newsletter H1 2019 Climate Bonds Initiative

If everything goes according to plan the index will also be tradeable on
the Luxembourg Stock Exchange that already hosts the China green bondconnect program.
ADBC & Climate Bonds Initiative sign MoU on developing green
agriculture in China
Agricultural Development Bank of China (ADBC) and the Climate Bonds
Initiative have signed a Memorandum of Understanding (MoU)
signifying a mutual consensus on the importance of developing green
agriculture projects and green bonds in China, and the need to direct
private capital to support China’s transition towards a green economy.

3Climate Bonds discussion: Green bonds from financial leasing companies
What is financial leasing?
Financial Leasing is an alternative way of financing whereby aleasing company purchases an asset and leases it its customer(s).
The leasing company (the ‘Lessor’) maintains ownership of thepurchased assets and receives lease payments from the customer(the ‘Lessee’), while the Lessee enjoys the use of the asset for theduration of the lease agreement, usually accompanied by anoption to buy the asset at the end of the leasing contract.
Financial leasing in low carbon sectors
The cost of purchasing, installing and maintaining low carbon
infrastructure is usually high and beyond the reach of mostconsumers or even operators. Low carbon equipment such as
solar photovoltaic (PV), wind turbine, water and waste treatment
facilities, and even an EV fleet can be arranged in a leasing
contract where the lessor purchase the equipment and, in somecases, provides installation, setup, training and/or maintenanceservices to lessee, including solar farm or wind farm operators,
water or waste treatment companies.
Waste 7%

Water 3%

By CBI definition, bond proceeds are used to finance four types ofgreen assets. Renewable energy is the dominant theme,
representing 80%, and funds are used primarily for solar and windequipment.
Transport is the second largest theme with 10% share in the mix.
Hebei Financial Leasing, Shenzhen BYD international Financial
Leasing and Jiangsu Financial Leasing have all issued green bonds
financing for low carbon transport such as electric vehicles.
The Waste and Water sectors represent 7% and 3%, respectively.
For example, Huarong Financial Leasing used its CNY2bn(USD291m) green bonds to purchase wastewater treatment
facilities to serve its clients in a sale-leaseback contract.
Certified Climate Bond from Jiangsu Financial Leasing
Jiangsu Financial Leasing has issued a CNY1bn (USD149m) Certified
Climate Bond, making the transaction the first Certified one inChina’s domestic market. The deal supports floating solar farms on
freshwater bodies. In this case, two solar facilities are built on land
above abandoned and collapsed coal mines, which have since been
filled with rainwater and become ponds and lakes.
One solar PV facility is built over a freshwater fishpond. It has atotal installed capacity of 150MW and became fully operational in
2018. This solar park was developed by Three Gorges New Energy, a
subsidiary of Three Gorges Corporation. The issuer has establisheda dedicated department to manage green assets, conduct due
diligence, and review lessee’s operation in the post-rental stage.

Transport
10%

Trends to expect
Energy80%

Green bonds issued by financial leasing corporates
There are 13 green bond issuers among Chinese financial leasing
companies. Issuance incudes 23 green bonds and green ABS. The
total amount issued has reached to CNY21.9bn (USD3.4bn).

Financial leasing provides easier access to equipment for renewableenergy operators or vendors entering the market, while green
bonds give financial leasing companies the ability to finance thepurchase of low carbon assets. Coupled with the increase in China’s
infrastructure spending and the surge of the low carbon sector, we
believe this serves as a strong catalyst to drive the demand in green
bond issuance.

Green bonds from financial leasing companies
Amount issued in USD

Number of deals

600

5

500

4

400

3

300

USD Millions

200

2

100

1

0

0

China Green Bond Market Newsletter H1 2019 Climate Bonds Initiative4

Policy update
Guizhou province released the Standards and Assessment Methods forGreen Finance Programmes

Notice of the PBoC on supporting green financial reform andinnovation pilot zones to launch green debt financing tools

Issued by Guizhou Local Financial Supervision and Management Bureau
and Management Committee of Gui’an New District, the Assessment
Methods consists of the Guiding Standards for the selection of green
projects that can be included in a green finance database in Guizhou
Province. It formulates assessment methods for projects in seven sectors,
namely eco-utilization, green energy, clean transport, building energy
efficiency and resource recycling, urban and park green upgrading andbio-diversity protection.

The notice supports non-financial enterprises in the five green financepilot zones to launch debt financing tools in the inter-bank market, basedon the green bond endorsed project catalogue. The notice supports
enterprises operating in urban infrastructure development sectors to use
green debt financing tools such as green bonds and green ABS.

In addition to assessment standards and procedures for eligible green
projects, the document also includes a tracking and management
mechanism for green finance programmes in order to enhance postinvestment supervision and track the impact.
Shanghai to promote green finance for green agriculture
Shanghai Municipal Office for Financial Work and another fivedepartments released an implementation Opinions on Promoting
Financial Innovation to Support Rural Rejuvenation in Shanghai.
Aiming at promoting financial innovation and supporting the rural
rejuvenation strategy in Shanghai, the policy reinforces the importance ofgreen finance and green agriculture development.
Measures include supporting policy banks, commercial banks andfinancial leasing companies to issue green financial bonds, exploring
integrated soil fertility index insurance to promote green agricultural
production; enhancing financial support for the development of a worldclass ecological zone in Chongming district, providing integrated financial
service for the pilots of the green agricultural control system andfacilitating full-course supervision of agricultural means of production.

The National Association of Financial Market Institutional Investors(NAFMII) will open a green channel to facilitate the service. The noticealso encourages the pilot zones to establish a market-based credit
enhancement mechanism and a green project database where eligible
green projects are given priority to in bond issuance. It also encourages
local government to promulgate financial incentives.
Implementation Plan on the National Eco-civilization Pilot Zone
(Hainan), issued by the Central Committee of the Communist Party of
China and the State Council
Key tasks of the plan include the implementation of carbon sink pilot
projects related to the maritime ecological system and build Hainan as ademonstration zone of low carbon development.
It also studies the blue carbon standard system and trading system andattempts to establish a global carbon emission right transaction place.
By 2020, it aims to reduce energy consumption per unit of grossdomestic product by 10% and decrease carbon dioxide emissions perunit of gross regional product by 12%, relative to 2015.
Key tasks of the plan also include establishing a green financial support
and guarantee system and supporting Hainan to carry out green financial
reform and innovation pilot programs.

Authors: Alan Xiangrui Meng, Sherry Shangguan, with the help from Jin ShangThis newsletter is produced by Climate Bonds Initiative in partnership with China Central Depositing and Clearing Co. (CCDC). Funding for this publication
was provided under a grant from the UK Government under its Partnering for Accelerated Climate Transitions Programme (PACT) and HSBC as a supportingorganisation.
* Figures used in this report refer to both onshore and offshore green bonds issued by entities domiciled in mainland China, and green panda bonds unlessotherwise stated. Internationally aligned green bonds are those aligned with both local and international definitions of green.

The report is also available in Chinese

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investment adviser. Any reference to a financial organisation or debt instrument or investment product is for information purposes only. Links to external websites
are for information purposes only. The Climate Bonds Initiative accepts no responsibility for content on external websites. The Climate Bonds Initiative is notendorsing, recommending or advising on the financial merits or otherwise of any debt instrument or investment product and no information within thiscommunication should be taken as such, nor should any information in this communication be relied upon in making any investment decision. Certification under
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China Green Bond Market Newsletter H1 2019 Climate Bonds Initiative

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