中国绿色债券市场季报 2018 年第 1 季度
JAN-MAR 2018/2018 年 1 月至 3 月

Market Overview

USD Billions

China vs. gloabal green bond issuance60

At a Glance40

Total Q1 Chinese Issuance:
USD4.4bn / RMB 28bn

20Issuance that meets international definitions:
USD2.6bn/RMB16.5bn

0
Qtr1

Qtr2

Qtr3

Qtr4

2017

Qtr1
2018

China Issuance not aligned with international definition
China Issuance-aligned with international definition
Global issuance-aligned with international definition (except China)

Largest issuer:
Beijing Capital
Largest issuing sector:
Green buildings

Offshore issuance made up of 38%

Q1 witnessed a 50% volume increase, year on year
Total green bond issuance from China went up to USD4.4bn, a 50%
increase year on year. However, 40% of new deals are not in linewith international green bond definitions.
Over half the bonds, which are not aligned, were excluded due to ahigh intended use of proceeds to finance general working capital,
well above our limit of 5% of raised funds. As we have noted inprevious newsletters, these bonds are acceptable under theguidelines set forth by the National Development and Reform
Commission (NDRC), but they are not defined as green by theinternational community and are thus not eligible for inclusion in
our green bond list.

Exclusion due to working capital
Lack ofdisclosure>5%
allocated
to working
capitalDifferences
betweendefinitions

offshore

China Interbank

Shenzhen Stock Exchange

Shanghai Stock Exchange

Offshore issuance surged in the first quarter
Offshore issuance rose due to steps taken by some leading
corporates and big commercial banks. What’s more, issuers from amore diversified sector base issued green bonds on offshore
markets. In addition to repeat green bond issuer Modern Land,
Tianjin Rail Transit, Beijing Capital and Century Concord Wind
Power issued their first offshore green bonds, raising USD1.6bn.
Hong Kong, Singapore, and Euro MTF were the most popular
offshore listing venues in Q1. Domestic issuance was placed mainly
through the China Interbank market.

Strong momentum from non-financial corporates
Issuance from non-financial corporates doubled compared to thesame period last year, and accounted for 48% of Q1 issuance. 9 outof 11 non-financial corporate issuers are new to the market,
including Suntien Green Energy, Zhejiang Huayou Cobalt Co andZhuhai Huafa Comprehensive Development.
Financial corporates issued a total of USD1.3bn in Q1, while
government-backed entities raised USD811m.

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Millions

Allocation of proceeds (aligned issuers)
Adaptation
Land use
Waste management
Water management
Transport
Buildings
Energy

600
500
400
300
200
100
0

Diverse use of proceeds is on trend

92% of new aligned issuance carries an external review

The largest proportion of proceeds were allocated to clean energy,
as defined by PBoC. Allocations to green building – a sub categoryof Energy Conservation under PBoC’s Green Bond Endorsed Project
Catalogue – also contributed significantly to the mix. Shanghai
Lingang Economic Development, Modern Land and Zhuhai Huafa
Comprehensive Development issued green bonds to raise fundingfor commercial property development that has been certified as
LEED Gold or China Green Building Evaluation Standard 2-Star.

This achievement demonstrates an improvement in green
credentials. Sustainalytics has joined the reviewer list for the firsttime and was the largest external review provider for Chinese green
bonds in the quarter thanks to two offshore deals, for which it
provided second opinions: Beijing Capital and Tianjin Rail Transit (orUSD 1.1bn of green bond issuance in total).

Use of Proceeds (CBI definition)
Adaptation
3%
Land Use
Waste 4%
managame
nt
19%

13%

Buildings
30%

Transport
17%

8%

3%
19%

Energy
19%

USD
2.6bn

Water
management
8%

92% of aligned issuance have a review

38%
42%

6%
6%
4%

Sustainalytics
n.a
EY
CCXI

CICERO
Zhongcai Green Financing
Lianhe EQ
Pengyuan

Policy updates
Hong Kong to launch Green Bond Issuance Programme

Use of Proceeds (PBoC definition)
Clean Energy
Energy Saving
Resource Conservation &Recycling
Clean Transport

On 28 February, the Hong Kong SAR government announced in thefiscal budget its plan to launch a Green Bond Issuance Programmeof up to HKD100bn. The sums borrowed will be credited to theCapital Works Reserve Fund to provide funding for green public
works projects of the Government. A Green Bond Grant Scheme
will also be introduced, under which green bond issuers using theGreen Finance Certification Scheme, launched by the Hong Kong
Quality Assurance Agency in January, will get up to HKD800,000
subsidy for each issue.

PBoC strengths supervision of green bond allocations

Ecological Protection & Climate
Change Adaptation
General use or refinancing
Not avaliable
Pollution Prevention & Control

0% 5% 10% 15% 20%

In March, People’s Bank of China issued a circular on strengthening
the supervision of green bonds issued by financial institutions. Its
focus is on issuers’ operating status, authentication and progress inallocating the proceeds to green projects, compliance with screening
and decision-making procedures, and impact reporting. The circularcomes with regulations on information disclosure. They require
regular reports from green bond issuers on use of proceeds andprescribes templates for quarterly and annual reporting.

Note: Percentages may exceed 100% due to rounding

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On trend: Green securitisation
What is securitisation?

What’s a green securitisation?

Securitisation enables companies and lenders to sell off existing
financial assets to free up capacity for more business. It is theprocess through which an issuer creates financial instruments –asset backed securities or ABS – backed by financial assets such asmortgages or lease receivables. The ABS bonds are sold toinvestors who receive a return drawn from the cash flows of theunderlying assets. By aggregating the funding into a common
structure, securitisations enable institutional investors to financesmall-scale assets and small- and medium-size businesses.

A securitisation can be defined as “green” when the underlying
cash flows relate to low-carbon assets or where the proceedsfrom the deal are earmarked to invest in low-carbon assets.

A growing green securitisation market in China
China’s securitisation market has seen an exponential increase as it
scaled up from negligible volume in 2013 to USD170bn annual
issuance in 2017. The first Chinese green ABS were issued in 2016.
Tod date, there have been 15 ABS deals totalling USD2.6bn. The
proportion of green ABS increased from 1.7% of total green bondissuance in 2016 to 5.9% in 2017. However, green securitisations
remain a small proportion of the green bond market, and thepotential for growth is huge.
Allocations have covered a variety of climate themes such as
renewables, low carbon buildings, water management and low
carbon transport. The types of security have also become morediversified and include revenues from wind turbine and otherrenewable energy equipment leasing, green commercial building
mortgage receivables, account/bill receivables, etc. China now has
a diverse sector range in green ABS issuance.

Chinese Green ABS issuance
IssuerAsset / ABS collateralAmount(CNY)

Huadian Fuxin
EnergyElectricity infrastructure
Receivables

840m

Goldwind

Wind power revenue
receivables

1.3bn

Wuxi Transport

Public Transport revenue
receivables

2.0bn

Agricultural Bank of
China

Loans*

1.4bn

SPIC Ronghe
Financial

Wind and Solar Lease

2.5bn

Gezhouba Lvyuan

Waste Recycling receivables

1.3bn

Beijing Water
Enterprise

Sewage treatment receivables

2.1bn

Nantong Eco&Tech

Sewage treatment receivables

510bn

TGOOD

Power distribution revenue
receivables

983m

Sound

Sewage treatment receivables

820m

Gezhouba

Hydroelectricity receivables

800m

Wuhan Metro

Trust beneficiary rights

1.5bn

Guiyang Transport

Public Transport revenue
receivables

2.7bn

Harvest CapitalGreen CMBS mortgage

820m

Tus Sound Holding

Trust beneficiary rights

445m* Further assessment pending for loan and bond use of proceeds.

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Eligible underlying assets
The underlying collateral pool comprises financial assets such as:
•
•
•
•
•
•
•

mortgages on certified buildings, e.g. under LEED, BREEAM,
Energy Star or other building standards
mortgage financing for energy efficiency upgrades
loans/leases on electric vehicles and hybrids
loans/leases on solar and wind assets
loans/leases on equipment, e.g. EV charging stationsloans for energy efficiency improvements
loans to green (pure-play) SMEs

We provide three case studies of Chinese green ABS to showcase
the variety of collateral and how it is used to secure the deals.

Case study: solar and wind leases
In a solar or wind lease agreement, the solar or wind leasing
company entitles the operator to the benefits of the system(i.e., the energy that the solar panels or wind turbines
generate) for the term of the contract. Under thesearrangements, the leasing company owns and maintains
the solar panel or wind turbines, or the solar or wind farms.
Solar and wind ABS deals are usually backed by the lease
payments and power purchase agreements related to thesolar and/or wind farms, or, in some cases, by loans
extended to fund the acquisition and installation. Either
way receivables are used to fund the payment of interest
and repayment of the debt raised with the bonds.
SPIC Ronghe Financial Leasing, a subsidiary of the State
Power Investment Corporation (SPIC), issued a green ABS
deal of CNY2.48bn in November 2017. The deal comprises
4 senior and one subordinated tranche.
It is collateralised by lease payment from 17 lessees forrenewable energy assets including 13 wind farms and 4
solar farms across China.
Tranches

Amount(CNY m)Tenor(Year)

RatingSenior A1

569

0.4

AAA

Senior A2

969

1.4

AAA

Senior A3

200

1.6

AAA

Senior B

137

1.6

AA

Subordinatedtranche

607

4.1

n/a

Securitisations are structured finance transactions. A key
feature is creating debt tranches with different risk and/or
repayment characteristics. Different risk and repayment
characteristics command different pricing and appeal todifferent investors.

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Case study: green CMBS

Case study: water treatment receivables

Commercial mortgage-backed securities are ABS deals
secured on commercial mortgages.

Any stream of receivables or revenues can be used tosecure an ABS deal. Green ABS may be relatively new andlimited in number of deals so far, but the range of financial
assets and structures is diverse.

China recorded the first green CMBS in 2017. The threetranche deal was issued by Harvest Capital Management and
CECEP Group. The underlying asset is an office building
owned by China Energy Conservation and Environmental
Protection (CECEP) Group. The building received both the
LEED Gold certificate and China Green Building Label (GBL)
two-star certificate.
Tranches

Amount(CNY m)Tenor(Year)

RatingOne example of ABS backed by receivables is provided by
Beijing Enterprises Water Group. As the operator of 19
water treatment plants under takeover-operate-transfer(TOT) or build–operate–transfer (BOT) contract with 16
municipalities, it’s green ABS is backed by water treatment
service fee receivables, proceeds raised is allocated toanother 9 water infrastructure projects that fall into
Pollution Prevention, Resource Recycling and Adaptation
categories under PBoC’s green bond catalogue.

Senior A

500

11.6

AAA

Senior B

279

11.6

AAA

Tranches

Subordinatedtranche

41

11.6

n/a

Senior 1

260

1.0

AAA

Senior 2

260

2.0

AAA

Senior 3

270

3.0

AAA

Senior 4

300

4.0

AAA

Senior 5

310

5.0

AAA

Senior 6

600

7.0

AAA

Subordinatedtranche

100

7.0

n/a

ABS deals can be secured by both commercial and residential
mortgages. The biggest green bond issuer in the mortgage
backed securities space is US agency Fannie Mae whichissues Green MBS secured on multifamily properties(apartment buildings, operated by commercial landlords).
There have also been a number of green RMBS, which are
secured on residential mortgages.

Amount(CNY m)Tenor(Year)

RatingNews and events
ADBC signs MoU to display green bonds on LGX

2nd meeting of China-UK Green Finance Taskforce

On 23 January, the Luxembourg Stock Exchange (LuxSE) signed a
MoU with the Agricultural Development Bank of China (ADBC), thesecond largest policy bank in China, to set up an access scheme todisplay ADBC’s green bonds and sustainability bonds, on the
Luxembourg Green Exchange (LGX). The collaboration would help
International investors gain access to detailed information in
English about Chinese green bonds issued by ADBC, traded on the
Chinese Interbank Market (CIBM) and accessible through the Bond
Connect scheme. The information went live on 9 March.

The second meeting of China-UK Green Finance Taskforce took
place in London on 19 March. It was co-hosted by the City of
London Corporation Green Finance Initiative and Green FinanceCommittee of China Society for Finance and Banking. Featured
topics included promoting green asset securitisation in bothcountries, Greening the Belt and Road Initiative, analysing thecorrelation between ESG and financial performance, as well as thelaunch of a joint pilot programme on implementing the TCFD
recommendations for climate-related financial disclosures.

LuxSE and Shanghai Clearing House sign MoU toenhance visibility of Chinese green bonds

A strategic cooperation agreement was signed by both parties in
Beijing on 26 March, officially launching the China-UK Green
Finance Center to further promote green finance cooperation
between the two countries. The Center will conduct research on
related topics and organize seminars and other activities, as well as
explore the development of green technology companies andfinancial technology companies in the medium term.

On 20 March, LuxSE and Shanghai Clearing House signed a MoU tofacilitate access to Chinese green bonds for the international
investor community. This will to enhance international visibility andtransparency of Chinese green bonds.

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April 2018

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