China green credit grows

Banks is­sue 75 bil­lion yuan worth of en­vi­ron­men­tal bonds in the main­land in the first half of the year

China Daily (Canada) - - BUSINESS - By LUOWEITENG in Hong Kong sophia@chi­nadai­

With en­vi­ron­men­tal is­sues loom­ing high on pol­i­cy­mak­ers’ agen­das, China is grab­bing the lion’s share of global green fund­ing, demon­strat­ing the coun­try’s po­ten­tial as the game changer for the green bond mar­ket.

The is­suance of green bonds, which are debt in­stru­ments ex­clu­sively for projects that ad­dress en­vi­ron­men­tal is­sues, to­taled 75 bil­lion yuan ($11 bil­lion) in the main­land over the first half of the year, amount­ing to 33 per­cent of the global to­tal, ac­cord­ing to data from the cen­tral bank. of its kind and the very first deal made in dol­lars, eu­ros and yuan, com­pris­ing two-year, three-year and five-year bonds to fi­nance so­lar, wind and biomass projects through­out the world.

The multi­bil­lion-dol­lar sale also high­lighted Bank of China as the first lender from Asia to is­sue such in­stru­ments in Europe, lead­ing the global green fi­nanc­ing mar­ket, which had pre­vi­ously been Euro­pean dom­i­nated.

The Chi­nese main­land’s en­thu­si­asm to tap the green mar­ket has added some clout to the mar­ket, where is­suance has so far been on a small scale.

But, the hard fact is that even though the green mar­ket hit a record of $100 bil­lion last year and is pre­dicted to reach $80-90 bil­lion this year, the sec­tor re­mains a tiny part of the global bond mar­ket, which is around $78 tril­lion.

“The over­all green fund­ing pool is not big enough right now. For emerg­ing mar­kets, it’s even smaller,” Ma noted.

In a mar­ket pi­o­neered and paced by multi­na­tional fi­nan­cial in­sti­tu­tions in de­vel­oped economies like the Euro­pean In­vest­ment Bank and the World Bank, an­a­lysts are eye­ing more and more cor­po­rate is­suers to join the fray.

The growth of the cor­po­rate green bonds mar­ket opens up the mar­ket to higher yields than the debt is­sued by the AAA-rated mul­ti­lat­eral banks, help­ing to ease the lin­ger­ing con­cern over the yields that be­sets green bonds in­vestors to­day.

Util­ity com­pa­nies, with eas­ier ac­cess to green busi­ness, are the nat­u­ral fore­run­ner.

But the mar­ket would wel­come more house­hold blue-chip names, even if they don’t have­much­green busi­ness foot­print, to make a foray and help the is­suance pick up steam.

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