Polaris solar PV net news: Green bonds is “green”, “green” theme-related securities, bond financing will eventually be used in energy-saving emission reduction and eco-environmental protection and sustainable development. Green bonds in China’s criterion introduced by regulators from top to bottom. According to people’s Bank announcement, green finance bond issue legal person according to law refers to financial institutions, mobilization of financial resources to support the green industry and according to the agreed repayment of securities; definition given by the national development and Reform Commission: the Green bonds refers mainly to raise funds to support energy-saving emission reduction technology, green cities, green bonds and green loop of low carbon development projects corporate bonds.
First year of 2016 is the Green bonds. Shanghai Pudong Development Bank, Société Générale rushed to release the first phase of green the financial debt, marked the official formation of green bonds market in China. Green bonds in China despite a late start, but green bond market has great potential. Especially the end of 2015, after guidance from the Central Bank and the national development and Reform Commission unveiled green bonds, green bonds speed will increase rapidly. Green bonds have broad market prospects, the development space is enormous. Expected annual investment needs of the green industry in China at more than 2 trillion yuan, the financial resources can only meet the needs of 10%-15% of green investment, green bonds market has great potential. In supporting the regulatory policy guidelines, green bonds market in China is expected to realize rapid, orderly and healthy development.
First year of green bonds: from theory to practice
Green bonds as its name suggests, with the “green”, “green” theme-related securities, bond financing will eventually be used in energy-saving emission reduction and eco-environmental protection and sustainable development. As global climate change, natural resource depletion, deterioration of the ecological environment of rising, more and more world attention on climate change, in the financial sector “carbon finance”, “energy”, “green finance” support, such as climate change and promote energy conservation business segment also continued to develop and extend.
1, the definition of green bonds: funds used as standard
Green bonds early and no uniform rules and definitions, but the multilateral policy of international financial organizations, international financial institutions, local governments and multinational enterprises through the issuance of bonds to finance green projects, is also believed to be the early green bond category. Peer standards of green bonds now include principles of green bonds (Green Bond Principle,GBP) and climate debt Organization standards (CBI).
Principles of green bonds is composed of green bond issuers, investors and underwriters principle Executive Committee consisting of green bonds (GBP Initial Executive Committee) and the international capital market Association (ICMA) launch, in order to enhance the Green bonds information disclosure transparency, promote green health voluntary guidelines for the development of the bond market. April 2014, the international capital market Association (ICMA) was appointed as GBP-Secretary-General, on March 27, 2015, ICMA joint over more than 130 financial institutions introduced the latest version of the principles of green bonds (GBP). By the end of 2015, global more than 103 green bond issuers, underwriters and investors become members of GBP, over 54 organizations adhere to principles of GBP.
Climate bonds Organization (Climate Bond Initiative,CBI) is currently the world’s most active non-governmental organizations in promoting green bonds designed to confirm the use of fundraising in line with low-carbon economy requires. CBI was developed with the purpose of GBP complementary standards, through the implementation of specific guidelines, and clearly define what is at the industry level to meet “green” standards. CBI in the standard-setting process in the second opinion provides agencies with the Green bonds, certification procedures supervisory green bonds.
Green bonds in China’s criterion introduced by regulators from top to bottom, according to the people’s Bank announcement, green finance bond issue legal person according to law refers to financial institutions, mobilization of financial resources to support the green industry and according to the agreed debt-servicing portfolio. Green industry the project scope can refer to the catalog of green bonds support projects. NDRC to out of defined: Green bonds is refers to raised funds main for support energy-saving emissions technology, and green town of, and energy clean efficient using, and new energy utilization, and cycle economic development, and water resources save and non-General water resources utilization, and pollution control, and ecological agricultural forestry, and energy-saving environmental industry, and low carbon industry, and ecological civilization first model experiment, and low carbon pilot model, green cycle low carbon development project of enterprise bonds. Visible for green bonds is mainly focused on the definition of use to raise money.
In fact, green bonds not only has the basic elements of common bonds, also should have “green” attributes in the use of bonds to raise funds, green project assessment and selection, fund-raising tracking management, regular information disclosure should be distinguished from ordinary bonds.
2, the international bond market: fast development after 2013
Launched with GBP principles and CBI’s active, international bond market is expanding rapidly, 232 number 2015 green bond issue, issue size of 3.95 billion yuan. Meanwhile, green bonds issuers from the original international or regional policy financial institutions to include local governments, commercial banks, enterprises, and many market players. In terms of investors as foreign “duty to investors” scaling up, asset management companies, banks, brokers, funds and other investments are involved in green bonds.
International market green bonds issuing terms are 1-5, accounted for more than 60%, 10 years of green bonds only 11% per cent. Ratings, higher levels of green bonds overall rating, AAA rating at 53% per cent, other ratings, more balanced distribution, it also means that current overall lower risk of green bonds, so the rate is generally low. Also see low rating of green bonds began to appear, market participants increased identified green bonds and not directly related to low credit risk.
Figure 1: international bond issuance (millions of dollars)
Figure 2: International green number bonds (only) source: CRE stock
3, green bonds: 2016 label green bond released
Green bonds started late in China, but the Green bond market has great potential. Especially the end of 2015, after guidance from the Central Bank and the national development and Reform Commission unveiled green bonds, green bonds speed will increase rapidly.
China Green bonds practice first can dates back to May 8, 2014, in the wide nuclear wind electric limited in Bank between market issued of “14 nuclear wind electric MTN001”, for China first single “carbon bonds”, issued scale 1 billion yuan, term 5 years, due to and issued people subordinates of 5 home wind electric project of carbon trading returns directly related, in general range Shang finds for includes “green property” of bonds. On June 14, 2014, the international financial companies on the London Stock Exchange issued the world’s first green Yuan bonds, issuance of 500 million Yuan, the 3-year period, the credit rating AAA, rate of 2%. Developing economies of the bonds to raise funds to finance renewable energy and energy efficiency projects. Bond green property is used by the Centre for international climate and environmental research (CICERO) found that bond investments are mainly Asian institutional investors. On July 16, 2015, Xinjiang goldwind science and technology company limited in Hong Kong Stock Exchange issued China’s first green bonds, a $ 300 million, 3-year period. On October 13, 2015, the agricultural Bank of China successfully issued $ 1 billion total on the London Stock Exchange 3 quanto green finance debt, funds will be invested in green bonds offer according to the internationally accepted principles of green bonds (GBP) and qualified third-party certification body accredited green projects cover clean energy, biomass, municipal solid waste and waste water treatment and other fields. On January 27, 2016, the Shanghai Pudong Development Bank successfully issued 20 billion yuan in the interbank market green finance debt, period of 3 years, fixed rate 2.95%. Then on January 28, Société Générale issued 10 billion yuan in the interbank market green finance debt, period of 3 years, fixed rate 2.95%.
In fact, meet the criteria of green bonds to invest in China there are many energy-saving environmental protection industry, company-issued corporate bonds, even the railway debt belongs to the category of green bonds, but due to lack of independent professional certification for green bonds issued by “second opinion” and therefore did not form a unified market green bonds.
Read Bank policy guidelines and national development and Reform Commission on green bonds
1, the Bank of green finance notice: third party independent certification and international standards
On September 21, 2015, the overall programme of reform of the CPC Central Committee and the State Council issued the ecological civilization, is China’s top design and deployment of reforms in the area of ecological civilization, for the first time puts the green in China’s financial system as a whole, credit, green, stock indices, and Green Green bonds, green credit asset securitization as an important part of green financial system.
Under the guidance of the programme, continues to lead the Green loans to the Central Bank at the same time, launch green bonds in the inter-bank bond market, and publish a notice of the relevant matters concerning the issuance of green bonds (people’s Bank of China announcement (2015), 39th) and a complete set of the catalog of green bonds support projects. Among them, is the use of clear green financial bonds to raise funds. Bulletin points out that “funds are used to support the green industry”, “green industry the project scope can refer to the catalog of green bonds support projects”. Meanwhile, notices requiring financial institutions to raise investment in green finance debt to provide letters of commitment to green industry projects. Second, green finance debt program evaluation and selection criteria proposed disclosure requirements. Notices requiring financial institutions application for issuing green financial debts, clear in the prospectus “green industries to raise funds to be invested project categories, project selection criteria, decision-making procedures and environmental targets and green finance bonds to raise capital planning and management systems.” Three are clear demands on the continuance of money management, ensure that funds meet green standards. Four is the introduction of a third-party assessment and certification mechanisms, in line with the international market. Five is to encourage necessary preferential policies to support development of green financial debt in a bid to attract all types of financial institutions and securities investment funds, and other investment plans, social security fund, corporate pension, public funds and other more widespread investor participation in the market.
2 green bonds, development and Reform Commission issued guidelines: policy significantly, issuing the lack
On December 31, 2015, the Office of the national development and Reform Commission published the Green bonds issued guidelines on notice (the change-financial (2015) No. 3504 files), clear definition of green corporate bonds and support areas.
Among them, a clear green corporate bond definition and funding of priority areas of support, but the lack of clearly defined standards. Guidelines explains the Green corporate bond definition and green bonds is given for 12 major areas of focus, including emission reduction project, green projects, such as urbanization, and each class of projects under the jurisdiction of the area was subdivided. But each type of project guidelines did not give clear “green” criteria and conditions, so the current guideline is directional. Second auditing introduced preferential measures to attract corporate issuance of green bonds. Third, allow reasonable use of optimizing the structure of debt to raise funds, expanded market capacity. Four is to guide relevant supporting policies to support and promote the Green bonds environments. Five different subjects in different forms and issuance of green bonds is encouraged and innovation note issuance programme.
3, the Green bonds featured link: independent assessment agency “second opinion”
Contrasting Central Bank announcements with the national development and Reform Commission guidelines, you can see the Central Bank announcement for “green” more detailed project definition and criteria, introduced an independent professional assessment or certification bodies, which in practice green issued guidance for financial debt. National development and Reform Commission announcement in terms of preferential policies for further advocacy, but determined and certified on the Green bonds itself needs to be further clarified.
In the international market, green bonds in addition to require credit rating by the credit rating agencies, in General, need to bring in an independent specialized agencies to “green” properties are found, green bonds for regulators and investors are more persuasive. For funds issued by independent professional organizations use green certification, called “a second opinion (Second Opinion)”. Currently international Shang common of Professional provides “second views” of institutions including several class: a is academic class institutions, for example international climate and Environment Research Center (CICERO); II is traditional of environment social risk management advisory institutions, for example VIGEO,; three is traditional certification institutions, for example DNLGL group,; four is rating institutions, for example OEKOM Research Center,; five is traditional audit institutions, for example KPMG, and Ernst,.
Due to China’s “green bonds” officially defined by the end of 2015 was launched officially, so actually consists of railway bonds, although some of the environmental protection industry, company credit debt has “green” properties, but it was not as green bonds, or certificates issued by the third party expert advice. Until early 2016, and Shanghai Pudong Development Bank and Industrial Bank has 2 green finance debt, truly independent third-party certifier green finds the use of bonds to raise funds, and to track the use of the funds in the bond duration, regular disclosure reports. Third party green financial bonds needs to technical standards, project screening and evaluation process, funding arrangements and project management, reserves and valuation of the environmental assessment process to ensure that the information is true, complete and accurate. Among them, the “Ponte 16 green financial debt” green certification body for Ernst, “16 01 industrial green finance debt” issued by the Central University of finance and financial center for climate and energy independence “second opinion” green determination.
China Green bond market development prospects
Green bond markets in a broad space for development, but in the policy guidelines, green professional identification, information disclosure rules of green bond market infrastructure needs to be improved. According to green the bond market, we have the following views.
A green bond market prospects, the development space is enormous. At present, China is vigorously promoting economic restructuring and economic development, low carbon and energy-saving and emission reduction projects, financing needs. According to the financial Research Institute of development research center of the State Council estimated that annual investment needs of the green industry in China at more than 2 trillion yuan, and the financial resources can only meet the needs of 10%-15% of green investment, so green is extremely broad prospects for financial markets. Finance and Economics Centre for climate and energy finance data shows over the next 5 years, investments in green infrastructure projects to achieve at least 10 trillion yuan, green bonds will become an important financing channels. Market players are also actively involved in green bonds, with the exception of Industrial Bank, Shanghai Pudong Development Bank green finance debt other than Qingdao Bank on March 10 issues 4 billion green finance debt, in addition to a number of banks are issuing in your application queue. Corporate bonds, yili applications for energy has announced it will issue 2.5 billion yuan of green bonds.
Second, green bonds regulations and disclosure requirements need to be further improved. Current Bank green bonds in place notice on the matter of green financial debt is issued, funds, green found that to do a more detailed description. But the Green bonds issued guidelines of the national development and Reform Commission is more directional advice, in terms of definition and issuance of green bonds require still more details out. In addition, the Dealers Association has promulgated non-financial enterprise bond financing tool operational guidelines for comments; China Securities Regulatory Commission approach in the development of research of green corporate bonds. In addition, the Government will provide the Green bonds in some countries and regions provide the concessions, including taxes, increase the letter’s contents in order to promote the development of the market. As green bonds supporting the policy of continuous improvement, market development is expected to accelerate in the future.
Third, relatively uniform Green Green the bond market needed directories and independent third-party certification body. About “green” identified are green Health Foundation for the development of the bond market, this requires uniform access standards and professional certification body. Green and gold at present to Commission issued the list of green bonds support projects in China in reference to international GBP principles and standards of CIB on the basis, combined with our industry facts and classifications is given a more detailed list of green projects, but not by national development and Reform Commission and other regulators into the harmonization of regulatory standards, thus creating two sets of standards in the same market. If green project in China can be unified catalogue in the future, you can better facilitate investors bet that green bonds, and tracking the Green bonds and investments. In addition, identification of green bonds cannot be found by the issuers themselves, third parties who require professional qualification and continuous disclosure, avoid the Green bonds signs, enjoying the lower yields but failed to perform the obligation of green.
Four is to increase the rate of actual deficit in green bonds and financial scale. Because of the energy-saving emission reduction and adaptation to climate change in many projects involved in the field of infrastructure reconstruction or large industrial manufacturing, such as the list of green bonds support projects mentioned in the green building, energy-saving benefit of urban and rural infrastructure, environmental remediation projects, railway transportation, urban transit, wind power and so on, this is mentioned in the draft budget in 2016 “proactive fiscal policy” focus coincides with mine. In 2016, on behalf of the Government’s deficit was only $ 3%, but the Government still can not add to the deficit but also the way to positive financial results, which included green finance debt, the effect is equivalent to special financial debt, fiscal deficit up to an alternative effect. The other hand, many enterprises including widening the financing channels, reduce the cost of financing considerations, hope that the issuance of green bonds, once the relevant regulatory policies are clearly way, green debt sales will expand rapidly, and a green bonds against corporate bonds index limited, combining the would further push up the social scale.
Five green bonds “green” property cannot be used as guarantees for credit risk reduction. Despite the Green bonds has “green” properties, and is supported by policy and concessions, but the essence is the bond, is a debt-servicing obligations of debt financing instruments, which also face credit risk. Credit risk assessment and common bond is no different. Although in the early stage of market development, green label applications for bonds may for example, disclosure of the strict considerations, choose high quality investment in green industry projects, but still not be ignored due to the credit issuer and project quality, weak profitability and cash flow situation may give rise to credit risk. In fact, in the international field of green bonds, has appeared speculative grade bonds, “green” and “credit risk” should be treated as two independent areas.
Original title: Green-bond market is expected to be rapid, orderly and healthy development in China