China Green Bond Market Newsletter Q1 2019中国绿色债券市场季报 2019 第一季度
January-March 2019/2019 年 1 月至 3 月

USD Billions

Market overview
60

At a glance

50
40

Total Q1 Chinese issuance: USD6.9bn/RMB45bn

30

Onshore issuance: USD6.9bn/RMB45bn

20

Offshore issuance: None10

Issuance that meets international definitions:
USD2.9bn/RMB19.6bn

0
Q1

Q2

Q3

Q4

2018

Q1
2019

Pending

Largest issuer: Guangzhou Metro Group Co.,Ltd.
Largest issuing sector: Clean Transport

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 44% surge in Q1
Both China and global green bond markets were active in the past
three months. The total amount of global green bonds that arealigned with international definitions reached USD47.8bn in Q1 - an
42% increase from the same period last year.
The USD6.9bn worth of overall green bonds from China represents a
44% surge year-on-year. However, only 43% (or USD2.9bn) of Q1
volumes from Chinese issuers is in line with international green bonddefinitions, while 44% has been excluded in accordance with CBIGreen Bond Database Methodology. The rest 13% are remained in
pending until further analysis carried out.

Chinese green bonds are issued domestically
In Q1 all Chinese issuance was domestically listed. 70% of bonds wereplaced on the China Interbank Bond Market. This is followed bylistings on Shanghai Stock Exchange with USD1.86bn, or 27% of the
Q1 total. The remainder are listed on Shenzhen Stock Exchange.

27%
3%

became the primary reason for exclusion. For example, Nanchang
Metro’s CNY500m green bond was excluded due to the use of up
to 50% of proceeds for general working capital which could
potentially finance the issuer’s other business lines that are notnecessarily green, such as property development.

24%
Working capital/General needs
Not aligned
76%

13% of the total issuance remains in “pending”. For example, Anhui
Huaihai Industrial Development Group raised CNY300m for anenvironmental management project to tackle subsidence in a coalmining area. We kept this bond as pending because it is unclear if
the project will be carried out in an abandoned coal mining site ornot. The bond will be excluded from CBI database if the project islinked to an active coal mining site as it could be considered as ameasure to extend the mine’s life cycle.

Shanghai Stock Exchange

Green bonds on Pending list

Shenzhen Stock Exchange

In some cases, use of proceeds details are not available atissuance. Thus we cannot make 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 bondis added to the excluded bond list.

China Interbank Bond Market
70%

Working capital was the major reason for exclusion
As it has been highlighted in our 2018 China Green Bond Market
Report, proceeds allocation to working capital and/or general use

China Green Bond Market Newsletter Q1 2019 Climate Bonds Initiative1

Government-backed entities as the major issuer type

Low Carbon Transport is the dominant theme

Issuance from government-backed entities totalled USD2.7bn,
accounting for 39% of the Q1 total. All the 13 issuers are local
government financing vehicles (LGFVs). Except for Huzhou Municipal
Construction Investment Group as a LGFV of a prefectural-level city,
all the others are backed by province or provincial-level cities.

Low Carbon Transport dominated the use of proceeds mix at 54%,
followed by Renewable Energy (22%) and Water (10%).

Non-financial corporates are the 2nd largest issuer type. Seasoned
issuers include green pureplay companies such as CGN Wind Energy
Limited and Tus-Sound Environmental Resources. Five new issuers
came to market with their debut green bonds financing projectsaligned with international green definitions. These include Shandong
Water Affairs Development, Guangxi Xijiang Development.
Although the USD1.6bn worth of green bonds from financial
corporates represents a drop of almost 90% from the USD14bn
reached in Q4 2018, the figure is more than doubled the Q1 2018
volume of USD727m. All nine issuers are regional commercial banks,
and four of them are rural banks, including Guangdong Rural
Commercial Bank, Guangdong Nanhai Rural Commercial Bank,
Dongguan Rural Commercial Bank and Zhejiang Deqing Rural
Commecial Bank. In China’s banking system, rural commercial banks
focus on financing agriculture, infrastructure in rural areas, andfarmers. With the acceleration of China’s green bond market, we
expect to see further diversity of issuer types.

Q1 2019: government-backed entities dominant

Transport – Top 3: Guangzhou Metro Group, Nanjing Metro Groupand Chengdu Rail Transit Group are among the biggest issuers andraised a total of USD1.2bn for urban and intercity rail infrastructurein their local regions.
Energy – Top 3: China Suntien Green Energy Company, CGN Wind
Energy, and Jiangsu Guoxin Investment Group.
Water: The biggest issuer, Yancheng Haixing Group, allocated all
the proceeds from its green bond of CNY624m (UDS93.2m) towater treatment and environmental remediation at a lake district.
3%
1%

Renewable Energy
Low Carbon Building

5%
10%

Low Carbon Transport

22%

Water

5%

Waste
Land Use

54%

Industry
ICT
Adaptation

According to China’s local green bond definitions, the top three
categories are Clean Transport at USD1.8bn, Clean Energy at
USD1.26bn, and Pollution Prevention and Control at USD743m.

Government-backed entity
Non-financial corporate
Financial corporate
ABS
USD bn

0 0m

1,000
3 m
2 m 3,000
1 m 2,000

Three green ABS deals were issued in Q1 for a total amount of
USD775m. However only two deals (accounting for USD546m) arealigned with international definitions. Guodian Financing Lease’s deal
was excluded because its collateral includes receivables from a coalenergy efficiency project. The concern is coupled with the ambiguityof proceeds allocation as all funds raised will be used as general
working capital for the originator.
IssuerAsset / ABS collateralAmountGuangxi Xijiang
development &Investment Group

Cash flow fromhydroelectricity sales

CNY700m

Guangzhou Metro

Ticket sales

CNY300m

Guodian Financing
Lease

Leasing receivables fromfossil fuel, wind, and hydroprojects => excluded

CNY1.57bn

It is worth noting that a securitisation can be defined as green when
the underlying cash flows relate to low-carbon assets or where theproceeds from the deal are earmarked to invest in low-carbon assets.
In the Guangzhou Metro deal, for example, up to 25% of proceeds will
finance general working capital, but the deal is still considered as aneligible green ABS by CBI as it is fully backed by cash flow from low
carbon transport (ticket sales).
China Green Bond Market Newsletter Q1 2019 Climate Bonds Initiative2

67% of all issuance carries an external review

Guangdong led Q1 2019 green bond market growthMore than a third of green bonds did not carry any form of external
review. Most of these were NDRC regulated green bonds.

Guangdong
Shandong
Jiangsu
Beijing
SichuanJiangxi
Hebei
Hubei
TianjinZhejiang
YunnanChongqing
Anhui
Tibet

Lianhe Equator was the largest external reviewer in Q1 2019,accounting for 21% of the market share. EY ranks the 2nd, and it isfollowed by iGreenBank.

Lianhe Equator
EY
The iGreenBank
China Bond Rating
CECEP Hundred
CECEP
Shanghai Brilliance Credit Rating
Gloden Credit Services
CCX
None

21%
33%
14%
1%
1%

3%
7% 8%

11%

1%

0.0

0.5

1.0

1.5

2.0
Billions

Low Carbon Building

Low Carbon Transport

Water

Waste

Nanjing Pukou
Construction

Renewable Energy

Nanjing MetroGroup

Use of proceeds by Q1 2019 aligned issuers
Land Use

Adaptation

100%
80%
60%
40%
20%
ZDRC Bank

Yancheng Haixing
Group

Sichuan Railway
Investment Group

Shandong Water
Affairs…

Jiangsu Guoxin
Investment Group

Guangzhou MetroGroup

Guangxi Xijiang
development

GSRC BankGNRC Bank

China Suntien
Green Energy

Chengdu RailTransit GroupCGN Wind Energy
LimitedBank of Rizhao
Co.,Ltd.

Bank of Huzhou
Co.,Ltd.

0%

Post-issuance reporting analysis and re-classification
In January 2019, CBI published the second Post-issuance Reporting
Report in the Green Bond Market research. By shedding more light onreporting practices, it helps the market to understand the level ofadoption of reporting on allocations and environmental impact metrics.
China ranks first by reporting percentage by amount issued and fourthby number of bonds. The majority of Chinese issuers provided publicly
available information after issuance, with 85% of bonds complying by
number of bonds or 93% by value.

IssuerBonds

The analysis also helped us to track the alignment of proceeds allocation.
In some cases, issuers only provide category names for eligible projects orassets, e.g. clean transport, renewable energy, etc. However, they could
disclose further details at post issuance stage when funds have been
allocated. This allows us to track alignment with international definitions.
Re-classification: We excluded the following bonds from our database
due to the detailed proceeds allocation disclosed in their post issuancereports are not in line with CBI definition of green.

Total amountReason for exclusion

BAIC Motors

2

CNY4.8bn

CNY2.3bn (47%) was used for R&D and efficient internal combustion engine vehicles

Bank of Qingdao2

CNY8bnCNY1.28bn (16%) was not aligned (e.g. proceeds were used for tourist centres, etc.)

Hebei Financial Leasing

3

CNY1.3bn

CNY200m (14%) was used for thermal power plant (to remove SOx)

Wuhai Bank

1

CNY500m

CNY100m (20%) was used for clean coal projects

Bank of Luoyang

1

CNY1bn

CNY165m (16.5%) was used for natural gas-based projects

China Green Bond Market Newsletter Q1 2019 Climate Bonds Initiative3

Climate Bonds discussion: Green Industry Guiding Catalogue
Seven regulators, including the NDRC, Ministry of Industry andInformation Technology, Ministry of Natural Resources, Ministry of
Ecology and Environment, Ministry of Housing and Urban-Rural
Development, PBoC and the National Energy Administration,
released the Green Industries Catalogue in March 2019.
What does the catalogue aim to achieve?
The catalogue aims to promote energy saving and environmental
protection, clean energy and “clean” production. It provides
guidelines for and encourages local governments and regulators toformulate incentive policies and measures in investment, pricing
mechanisms, finance, and tax, taking into consideration their own
regional and sector development focus.
What does the catalogue include?
The Catalogue classifies categories into three levels. The first levelcomprises six categories as per the summary table below.
Compared with the Green Bond Endorsed Project Catalogue (2015)
commonly used in the field of green finance, the Green Industry
Guiding Catalogue additionally covers the green services industry,
the upgrade of industrial parks, etc. It expands the scope fortransportation and buildings and makes some deletions andchanges in definitions.

What is new in the catalogue?
The green services industry, which includes 5 sub-categories,
ranging from environmental consulting to green certification
services. It identifies organisations providing green bond second
party opinions, assurances and certification services.
What are the Implication for China’s domestic green bond market?
The catalogue provides a framework to define what are green
assets and green activities in China. Under this umbrella, local
governments and regulators could formulate policies andmeasures on green investment, pricing mechanisms, green
finance systems, and tax incentives to accelerate green finance.
Regulators such as PBoC and CSRC could update the list of eligible
green bond assets within the defined scope.
Eligible assets defined by PBoC’s green bond catalogue and
NDRC’s green bond guidelines are largely covered by the newindustry catalogue. Clean coal, coal efficiency and coal plant
retrofit also remained in the catalogue. PBoC is working on an
updated version of green bond catalogue and it will likely use theindustry catalogue as a reference. PBoC is also interested inharmonising its guidelines with international best practice.

Level I Category

Level II Category

Energy-saving andenvironmental protectionindustry1) manufacture of high-efficiency energy-saving equipment, 2) advanced environmental protection equipment,3) resource recycling equipment, 4) new energy vehicles and green ships, 5) energy-efficiency improvement, 6)
pollution control and 7) resource recycling.

Cleaner production industry

1) green upgrading of industrial park, 2) non-toxic and harmless alternative use of raw materials and treatmentof hazardous waste, 3) treatment and disposal of waste gas in production process and comprehensive
utilization of resources, 4) water saving, treatment and disposal of waste water and 5) comprehensive utilizationof resources, treatment and disposal of waste residue in production process.

Clean energy industry

1) manufacture of new energy and clean energy equipment, 2) the construction and operation of clean energy
facilities, 3) the clean and efficient utilization of conventional energy, and the 4) efficient operation of energy
systems.

Eco-environmental industry

1) ecological agriculture, 2) ecological protection and 3) ecological restoration.

Green upgrading of
infrastructure1) building energy efficiency and green building, 2) green transportation, 3) environmental infrastructure, 4)urban energy infrastructure, 5) sponge city, 6) green landscapes.

Green service

1) environmental consulting services, 2) environmental project operation management (such as carbon tradingand pollution-discharge right trading), 3) project evaluation, audit and verification (such as EIA), 4) monitoring
and testing (such as pollution monitoring) and 5) technical product certification and promotion (such as organic
food certification).

News and events
SSE and SEEE collaborate to accelerate green finance inShanghai: Shanghai Stock Exchange (SSE) and Shanghai Environmental
Energy Exchange (SEEE) held a green investment seminar and signed amemorandum on further cooperation to promote the development ofgreen finance by providing market education and developing green
investment indices.
SSE to display green bonds listed on LuxSE: Shanghai Stock Exchange
and the Luxembourg Stock Exchange signed a supplemental agreement
China Green Bond Market Newsletter Q1 2019 Climate Bonds Initiative

to the Green Bond Info Channel Cooperation Agreement and officiallylaunched the eastward information display of green bonds: green bonds
listed on the LuxSE will be displayed on the SSE website (eastward),
which will provide Chinese investors with an efficient and transparent
channel to obtain the information.
SZSE and LuxSE launched the Green Fixed Income Information
Channel: Shenzhen Stock Exchange (SZSE) and Luxembourg Stock
Exchange launched the Green Fixed Income Information Channel at the4

Boao Forum for Asia Annual Conference 2019. The Information Channel
displays information of SZSE green corporate bonds and ABS products on
LuxSE’s website, giving international exposure to SZSE’s fixed income
products and promoting connection of green products and services
offered by capital markets of China and Luxembourg.
Ma Jun shared China’s experience at NGFS seminar: Ma Jun, Directorof the Green Finance Committee of the China Finance Associationand Special Advisor to the Governor of the People's Bank of China,
chaired a seminar of the Central Banks and Supervisors Network forGreening the Financial System (NGFS) in Mexico City. He shared
China’s experience in developing the green bond market andestablishing a green finance system with 130 representatives from24 Latin American central banks and financial regulators. NGFS is agroup of Central Banks and Supervisors willing, on a voluntarybasis, to exchange experiences, share best practices, contribute to
the development of environment and climate risk management in
the financial sector, and to mobilize mainstream finance tosupport the transition toward a sustainable economy.

Policy update2019 Government Work Report reinforces the importance ofsustainable development and green financeWork Plan for the Pilot New Energy Vehicle Battery Recycling Programin Sichuan Province

Li Keqiang, Premier of the State Council, delivered the 2019
Government Work Report at the second session of the 13th
National People’s Congress. The Report lists “strengthening
pollution prevention and control, enhancing ecologicalimprovement, and making big advances in green development” as
one of the ten major government tasks this year. It also proposes toreform and improve the environmental economic policies, improve
the pollution rights trading system, and accelerate the developmentof green finance. This is the second consecutive year that theannual government work report directly mentions the developmentof green finance.

Nine departments of Sichuan Province including Sichuan Provincial
Economic and Information Department jointly released a Work
Plan, which aspires to achieve a production value of RMB500m in
the NEV battery cascade utilization industry and a production valueof RMB3bn in the material recycling industry by 2020. The recycling
will be facilitated through a combination of tools such as financeand tax, industrial fund, green credit, and green bonds.

Outline Development Plan for the Guangdong-Hong Kong-Macao
Greater Bay Area

China Development Bank will begin granting green credit facilities
based on market needs, applying its pledged supplementary
lending (PSL) from the central bank. It will provide cheap funding to
key industrial pollution prevention and control projects which meetthe PSL application requirements for eco-environment protection.

The CPC Central Committee and the State Council released theOutline Development Plan in February. It supports:• Hong Kong to develop into a green finance centre in the Greater Bay
Area and to set up an internationally recognized green bondcertification institution• Guangzhou to develop a pilot green finance reform and innovation
zone and to establish an innovative futures exchange that takes carbon
emission as its first trading commodity• Macao to study the feasibility of a green finance platform denominatedand cleared in RMB

Ministry of Industry and Information Technology and the China
Development Bank issued a notice on Accelerating Industrial Energy
Conservation and Green Development

Provincial departments of industry and information technology are
required to strengthen their coordination with local CDB branches
to give special financial support preferentially to programs intechnological transformation and green manufacturing, industrial
parks and projects that have already obtained green loans.
As one of the monetary policy tools of the central bank, PSL
accepts high-rated bonds and quality credit assets as collateral. It
mainly supports the three policy banks to fund shantytown
renovation and major water conservancy projects.

• Shenzhen to enhance cooperation with Hong Kong in green finance.

Authors: Alan Xiangrui Meng, Sherry ShangguanThis newsletter is produced by Climate Bonds Initiative in partnership with China Central Depositing andClearing 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 supporting organisation.
* Figures used in this report refer to both onshore and offshore green bonds issued by entities domiciled in mainland China, and green panda bonds
unless otherwise 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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China Green Bond Market Newsletter Q1 2019 Climate Bonds Initiative

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