China green credit grows
Banks issue 75 billion yuan worth of environmental bonds in the mainland in the first half of the year
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.