Green bond set to boost en­vi­ron­ment

China Daily (USA) - - BUSINESS - By CE­CILY LIU in London

In­ter­na­tional in­vestors will find it eas­ier to buy into China’s en­vi­ron­men­tally-friendly projects after the Bank of China listed a “cov­ered green bond” on the London Stock Ex­change on Fri­day.

The three-year $500 mil­lion China Green Cov­ered Bond, the first such bond to be is­sued by a Chi­nese en­tity and se­cured by on­shore as­sets, of­fers in­vestors a coupon rate of 1.875 per­cent.

The struc­ture of cov­ered bond is in­no­va­tive, giv­ing in­vestors dual re­course: al­low­ing claims over a ded­i­cated “cover pool” of as­sets, and the usual claim against Bank of China.

It is likely to be pop­u­lar amongEuro­pean in­sti­tu­tional in­vestors, es­pe­cially funds with man­dates to in­vest in sus­tain­able projects.

“We re­gard it our own mis­sion to con­nect China’s promis­ing Green Bond mar­ket with London’s vi­brat­ing cap­i­tal mar­ket,” said Bank of China Chair­man Tian Guoli.

“This par­tic­u­lar green cov­ered bond con­nects China’s on­shore green bond mar­ket with in­ter­na­tional in­vestors, via an asset backed struc­ture,” he added.

Tian also stressed the sig­nif­i­cance of the bond’s “dual green fea­tures”, which means the uti­liza­tion of the funds raised from the bond is in line with in­ter­na­tional green bond stan­dards, but also the cov­ered as­sets are is in line with thePeo­ple’s Bank ofChina’s green bond guide­lines.

Yi Gang, deputy gover­nor of the PBOC, said the bond has a par­tic­u­lar sig­nif­i­cance in fur­ther­ing strong UK China collaboration in green fi­nance al­ready achieved at the G20 Lead­ers Sum­mit in Septem­ber.

value of green bonds is­sued by China as of July

Yi added the bond’s list­ing on the London Stock Ex­change is also sig­nif­i­cant, as London is an in­ter­na­tional financial cen­ter. Yi said he ex­pects more Chi­nese financial in­sti­tu­tions will is­sue more prod­ucts in London in the fu­ture.

China has led the world in the sale of green bonds so far this year. As of July, it had is­sued 9.02 billion pounds ($11.23 billion) of green bonds out of the 25.69 billion pounds is­sued glob­ally.

The num­bers re­flect ro­bust growth from last year, when green bonds worth 27.46 billion pounds were is­sued glob­ally and 0.99 billion pounds by Chi­nese or­ga­ni­za­tions.

Green fi­nance was on the agenda at the G20 Lead­ers Sum­mit for the first time when China hosted the meet­ing in Hangzhou, when Bei­jing and the UK’s cen­tral bank jointly chaired the G20 Green Fi­nance Study Group which pre­sented a re­port that was ac­cepted and en­dorsed by G20 lead­ers.

The Bank of China’s green bond is rated Aa3 by debt rating agen­cyMoody’s, which is the sov­er­eign rating of China, sig­ni­fy­ing its strong credit qual­ity.

An­drew Carmichael, cap­i­tal mar­kets part­ner at law firm Lin­klaters, said the new bond showed both China and the Bank of China’s com­mit­ment to green fi­nance — and to en­abling in­ter­na­tional in­vestors to have ex­po­sure to Chi­nese do­mes­tic green financial as­sets.

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