CHINA GREEN BOND MARKET Newsletter
中国绿色债券市场季报
OCTOBER-DECEMBER 2016 ISSUE 2 2016年10月-12月 总第2期

News and Events
China Green Bond Market 2016 Reportlaunched on 17th January!

Green investment ties strengthened at the 8th
UK-China Dialogue

The ‘China Green Bond Market 2016’ report isan in-depth analysis of the labelled green bondmarkets in China. Produced in partnership with
China Central Depository & Clearing Company(CCDC), this report analyses 2016 domestic green
bond developments, with a focus on investment
trends, green bond issuance and use of proceeds.

The UK’s Chancellor of the Exchequer Phillip
Hammond and Chinese Vice Premier Ma Kai
concluded the eighth UK-China Economic
and Financial Dialogue on 10 November 2016,
in London. Both parties agreed to develop
channels and financial products for cross borderinvestment in green bonds (including potential
new platforms) to facilitate direct international
investment into eligible green and climatealigned securities in China’s interbank bondmarket, via the City of London.

Chinese coal city is looking for a transition
through green finance
5 December 2016, a ‘Green City Bonds – China’roundtable was held in Datong, as part of the
Datong International Seminar on Green Finance.
With an existing economic base in coal, Datongis looking to green finance to help accelerate
the transformation to a low carbon economy.
The London Stock Exchange, Climate Bonds
Initiative and SynTao Green Finance presented on
domestic and international green finance trends,
green bond developments and investment outlook.
4th China-France Dialogue includes jointcommitments on green finance and green
bond market development
China and France’s Ministries of Financehave completed the fourth China-France
High Level Economic and Financial Dialogue(HED) in Paris. The Communique reflects jointcommitments on climate action and green
finance, including promoting cooperation
amongst PBoC, Bank of France, EUROPLACE,NAFMII and the Green Finance Committee on
green finance issues; promoting cooperation
between China and France on green bondmarket development, and supporting green
bond issuance in both countries.

Additional commitments centred aroundbilateral support for Chinese entities toissue green bonds and other green financial
products in the UK, and support for British andinternational investors to issue green bonds
and back green projects in China. Cooperation
around solutions for financing smart andgreen cities, and building London as a market
for Chinese entities to issue green financial
products was also noted.
Climate Bonds Standards: Chinese Version –Launched at Shenzhen Green Bond Seminar
A Green Bonds seminar was jointly heldby Climate Bonds Initiative, SynTao Green
Finance and Shenzhen Emission Exchange,
in November 2016, to promote green financeand market awareness.
Sean Kidney launched the Chinese versionof the Climate Bonds Standard (v2.0) to an
audience from mainland China and Hong Kong.
The Chinese language version of the Standard
adds another resource for domestic issuers toassist in the certification of green bonds
and understanding of international markets.

Policy Update
New Five Year Plan on Wind Energy
Development looks to green bonds to support
a projected RMB700bn of investment
A specific 13th Five-year Plan on Wind
Energy was issued by the National Energy
Administration of China in late November.
The plan’s 2020 targets include increasing
electricity generated from wind power to
4,200 TWh (making up 6% of the country’s
overall electricity generation); reducing 350
tons CO2 emission/year and creating 300,000

At a Glance
Total Q4 Chinese Issuance:
USD 12.5 billion / RMB 89.3 billion
Issuance that meet international
definition:
USD 7.7 billion/RMB 53billion
Largest issuer:
Bank of Communications
Largest issuing sector: Energy

Second party reviews of all Chinese green bonds
Syntao Green
Finance 3%

China Credit
Rating 3%

CECEP
10%
EY
11%

None
38%
Q4

Deloitte
35%

Q4 Quick summary
new jobs. The Plan also states an intention to
explore “innovative financing models [which]
reduce financing costs” for the wind industry, as
it has been estimated that “at least RMB700bn
investment in wind energy will be required” tomeet its targets.
The Plan encourages companies in the windindustry to “utilise instruments such as green
bonds and securitisation” and targets many energy
SOEs, including existing green bond issuers such asState Grid, Huaneng, Datang and CECEP.

22 bonds were issued in Q4 2016,
amounting to RMB89.3bn (USD12.5bn).
The largest issuance was made by Bank ofCommunications at RMB30bn - also thelargest-ever green bond issued up to then.
Goldwind green ABS issuance in Augustand 2 policy banks bonds in December are
increasing market diversification.
The proportion of corporate issuanceincreased from 8% in Q1 to 33% in Q4.

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OCT-DEC 2016 ISSUE 2

Green Bonds Comment
Why clean coal projects are not in line withinternational investors expectations?
Clean coal projects are included in the PBoC
green definitions for China. Clean coal differsfrom regular coal generation as technologies
such as gasification are used, during which atleast 98% of sulfur contaminants are removed
as slag1. New plants using clean coal technology
can reduce emissions compared to existing
generation methods, thus helping reduce
local air pollution, something is particularly
important in the Chinese context as air quality
is a serious environmental and health issue inmany regions.
While we recognize the positive environmental
attributes and the Chinese context, clean coal is
not included in the Climate Bonds Taxonomy ofeligible green assets.

That is primarily because investment in thistechnology does not shift energy reliance awayfrom coal use and instead can serve to increase
the life of existing retrofitted plants and/or
the construction of new plants. Furthermore,even if the most advanced technologies areused, coal-fired power plants still emit about
twice the amount of CO2 than that of gas-fired
power and 15 times that of renewable energy(over the full lifecycle)2. Research from theWorld Coal Institute showed that the emissions
control programme at a power station in South
Africa removed 99% of the fly ash but still
emitted 60,000 tons of particulates (a major
contributor to air pollution in China) every
year3.

scientific studies and global carbon budget
analysis indicates that 80% of current
coal reserves should remain unused from2010 to 20504. Accordingly, all coal-fired
power stations need to be replaced assoon as possible. Rather than reducing coalconsumption, investment in a coal plant
serves to extend the life of coal based energy
generation and locks in the use of coal-fired
power for decades into the future.

Given the rapid transition which needs to takeplace to stay within 2 degrees of warming,

1. http://eccc.uno.edu/pdf/Flyer05_Gasification.pdf
2. https://europeanclimate.org/documents/nocoal2c.pdf
3. http://www.greenpeace.org/new-zealand/Global/new-zealand/
report/2007/1/clean-coal-technology-briefing.pdf
4. http://www.nature.com/nature/journal/v517/n7533/full/nature14016.html
5. http://mobile.reuters.com/article/amp/idUSKBN151090

Market Data

Earlier this year China’s energy regulator, theNational Energy Administration (NEA), ordered
11 provinces to halt more than 100 coal-fired
power projects; a combined installed capacityof more than 100 gigawatts. This is the latest
dramatic step to curb the use of coal5.

2016 growth of Chinese and global green bonds• China Issuance (aligned with China’s green definitions)• China Issuance (aligned with both China and international definitions)• Other countries Issuance (aligned with both China and international definitions)$30 bn$25 bn$20 bn$15 bn$10 bn$5 bn$0Q1 2016

Individual issuer’s allocation of proceeds
according to PBoC’s Green Bond Endorsed
Project Catalogue
Ecological Protection andClimate Change 8%
Not
Specified
9%
Energy Saving
15%
Clean
Energy
15%

Q4

Clean
Transport
16%

Pollution
Prevention
and Control
17%

Q2 2016

Q3 2016

Q4 2016

Allocation of proceeds according
to CBI Taxonomy

Chinese green bonds issuancein different markets

Energy Efficiency & Low
Carbon Buildings 15%

London 4%

Waste
Management
15%

Water
21%

Adaptation
13%

Shanghai 1%

Energy17%

Q4

Q4

Transport
15%

China Interbank
95%

Resource Conservation
and Recycling 13%

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OCT-DEC 2016 ISSUE 2
Individual issuer’s allocation of proceeds according to PBoC’s Green Bond Endorsed Project Catalogue• Energy Saving• Resource Conservation and Recycling• Clean Energy• Not Specified• Pollution Prevention and Control• Clean Transportation• Ecological Protection andClimate Change Adaptation• Refinancing

Yunnan Energy

Wuhan Metro

China Datang Renewable

Poten Environment

BJ Enterprise Water GroupState Grid Corp of China

BJ SPC Environmental

JS Nantong Rural Bank

Jiangsu Guoxin Investment

Industrial Bank Co Ltd

GEM Co Ltd

GD Huaxing Bank

Export-Import Bank China

20%

Dunan Holding Group

40%

Bank of Urumqi Co Ltd

60%

Bank OF Qingdao

Bank of China/London

Bank of Communications

80%

Agricultral Development Bank China

100%

0%

2016 Top 20 Underwriters• Q1 • Q2 • Q3 • Q4

Qilu Securities

COFCO

GALAXY Securities

GF Securities

China Merchant Bank

China Development Bank

Everbright Securities Co

HSBC

Bank of America Merrill Lynch

China Securities

0

Huatai Securities

0.5

Agricultural Bank of China

Bank of China

USD Billions

1

China International Capital

1.5

Haitong Securities

Guotai Junan Securities

2

China Construction Bank

2.5

Industrial and Commercial Bank of China

3

China Development Bank Securities

3.5

Crédit Agricole Corporate and Investment Bank

4

Reports
GREEN FINANCE:GREEN BOND DIRECTIONS
COP22Highlights
Climate finance through the green bond market has
grown substantially in 2016, funding both climate
mitigation and adaptation efforts. Issuance in 2016is on track to be more than double that of 2015
Growth in 2016 has been driven by government
action and demonstration issuance in China, withseveral other emerging markets growing- including
India and Mexico
Green bonds are now being seen as a tool for raising
capital to meet mitigation and adaptation targets set
out in the National Determined Contributions (NDC)
The green bond market
facilitates capital flows
for low carbon and climate
resilient development
Green bonds are regular bonds with one
distinguishing feature: proceeds are earmarked
for projects with environmental benefits, primarily
climate change mitigation and adaptation.

“To investors green bonds
offer a stable, rated and liquid
investment with long duration.
To issuers, they could tap the
US100 trillion global institutional
fixed income investor base.”
Mark Carney, Governor of the
Bank of England and FSB Chair

International
governance for green
bond markets
More consistent standards can support
market development, reduce market
frictions, address the risk of ‘greenwashing’and ensure that green investments arecontributing to tackling climate change.
The Green Bonds Principles (GBP) arevoluntary process guidelines arounddisclosure, reporting and monitoring of
the bond’s use of proceeds.
While not mandatory, the GBP havebecome widely used across the market
with most issuers noting compliancewith the Principles.
The Climate Bonds Standard is aframework that incorporates theGreen Bond Principles and thenadds science-based sector-specificcriteria for eligible projects, providing
green definitions within an industry
certification model.
National schemes have arisen in China
and India, referencing and broadly
reflecting the Green Bond Principles andthe Climate Bonds Standard approachto definitions.

A key characteristic is that green bonds areused to fund green assets and projects, notgreen entities.

Oversubscription of green bonds is the norm, we expect growth to continue

Green bonds have been issued by municipalities,
corporations, multilateral developmentbanks and cities. They can finance a rangeof projects including clean energy and waterprojects, sustainable land-use, low carbon
transport and energy-efficient buildings.

$70bn

The market is growing quickly
Annual issuance of green bonds has quadrupledbetween 2013 and 2015. As of October 31st, total
2016 issuance is already 50% greater thanthe 2015 total. Moody’s has estimated that
2016 issuance will be USD 80bn1.
As appetite has grown, the market has
become increasingly diverse with growing
issuance from new issuer types, in various
currencies and countries.
1 Climate Bonds Initiative – COP22

$80bn

$60bn
$50bn

••
•••

2016 estimate= $80bn

Bank
Corporate
ABS
Muni/provincial/city
Development Bank

$40bn
$30bn
$20bn
$10bn
$0bn
2012

2013

2014

2015

2016

COP22 Green Bond Directions paper

China Green Bond Market 2016

Report highlights:

Report highlights (您也可以获取本报告中文版):• Growing awareness of green bonds as NDC
financing tools.

• In 2016 China became the world’s largest green
bond market, taking just 1 year to accomplish what
in other markets has taken over 5 years.

• Growth has been driven by government action
and demonstration issuance in China - soon to
be the world’s largest green bond market - withother emerging markets, including India, Brazil and
Mexico.
• Green bonds are now being seen as a capitalraising tool to meet mitigation and adaptation
targets set out in the Nationally Determined
Contributions (NDCs). Download report• Growth has been spurred by key policy
developments and incentives put in place by the
PBoC and NDRC.
• China, through these policy developments, has
proven what Climate Bonds Initiative and othermarket players have long been saying - that policy
tools are essential for the growth of green financeand the green bond market. Download report

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OCT-DEC 2016 ISSUE 2

Q4 Chinese Green Bonds Issuance
ISSUER

MARKETDATEISSUED AMOUNT**SECOND REVIEWER

RATING AGENCY

RATINGUSE OF PROCEEDS*

Wuhan Metro

China Interbank

26/10/2016

2 billion

China Credit Rating

Chengxin Rating

AAA

Low carbon transport

China Datang
Renewables

Shanghai Stock
Exchange

21/10/2016

500 million

EY

Dongfang JinchengAAA

Renewable energy

Beijing Enterprise
Water

China Interbank

02/11/2016

2.8 billion

Syntao Green Finance

Shanghai BrillianceAA+

Water management

Poten Environment

Shanghai Stock
Exchange

12/10/2016

300 million

EY

Shanghai Brilliance

AAA

Water treatment

Bank of China(London)London Stock
Exchange

09/11/2016

500 million (USD)

EY

Moody‘s Bond
RatingAa3

Mixed

Beijing SPC
Environmental

China Interbank

31/10/2016

1.09 billion

none

Lianhe Rating

AA

Mixed*GEM Co., Ltd.

China Interbank

31/10/2016

500 million

none

Lianhe Rating

AA

Mixed*

State Grid Corp of
China

China Interbank

20/10/2016

5 billion

none

Dagong

AAA

Energy*China Interbank

20/10/2016

5 billion

none

Dagong

AAA

Energy*Yunnan Energy

China Interbank

07/11/2016

500 million

none

none

none

Mixed*

Bank ofCommunications

China Interbank

22/11/2016

10 billion

Deloitte

Shanghai Brilliance

AAA

Mixed

China Interbank

22/11/2016

20 billion

Deloitte

Shanghai Brilliance

AAA

Mixed

China Interbank

24/11/2016

3 billion

EY

Shanghai Brilliance

AA+

Mixed

China Interbank

24/11/2016

1 billion

EY

none

none

Mixed

Industrial Bank
Co LtdChina Interbank

17/11/2016

20 billion

none

Shanghai Brilliance

AAA

Mixed
(inc. clean coal)*

Export-Import Bankof China

China Interbank

07/12/2016

1 billion

CECEP

none

none

Mixed

Dunan HoldingGroup

China Interbank

01/12/2016

1 billion

China Credit Rating

DagongAA+

MixedBank of Urumqi Co.,
Ltd.

China Interbank

08/12/2016

500 million

EY

Lianhe Rating

AA

Mixed

Jiangsu Guoxin
Investment

China Interbank

08/12/2016

200 million

China Credit Rating

Chengxin Rating

AAA

Mixed

Jiangsu Nantong
Rural Bank

China Interbank

14/12/2016

500 million

CECEP

Chengxin Rating

AA

Mixed

Guangdong Huaxing
Bank

China Interbank

21/12/2019

1 billion

CECEP

Chengxin Rating

AA

Mixed

Agricultural
Development Bankof China

China Interbank

23/12/2016

6 billion

CECEP

none

none

Mixed

Bank of Qingdao* The CBI Taxonomy excludes clean coal projects, although they are eligible under the China Green Bond Endorsed Project Catalogue. Also, large hydropower projects are currently excluded from our taxonomy due toissues of reservoir emissions and other social and environmental impacts. There may be scope to include these in the future but more research will be required from our recently convened technical working group.
** In RMB unless otherwise specified.

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Produced by Climate Bonds Initiative © February 2017.
Disclaimer: The information contained in this communication does not constitute investment advice and the Climate Bonds Initiative is not an investment adviser. 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 not advising on the merits or otherwise of any investment. A decision to invest in anything is solely yours. The Climate Bonds Initiative accepts no liability of any kind for investments any
individual or organisation makes, nor for investments made by third parties on behalf of an individual or organisation.

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