Why is Europe’s deep pool of funds attractive for Chinese green bond issuers?
Drawn by increasing need to fund green projects spurred by China’s Belt and Road Initiative, several leading Chinese banks have tapped euro funding by getting their climate-aligned bonds certified
Ten years after the world’s first green bond, Chinese issuers – the largest globally – have stepped up efforts to tap the fast growing European funding pool. Their increasing use of international climate bonds standard to raise offshore funding underlines their early success in dissipating doubts about their bonds being not-so-green.
The green bond market’s rapid growth is set to continue into next year, deal arrangers and fund managers say, as more investors have embraced the idea that protecting the environment and making a positive social impact will not compromise – and as some argue, even enhance – returns because of issuers’ better risk management and growth opportunities from green businesses.
Chinese issuers are poised to tap into such growth. Just this quarter three banks – Industrial and Commercial Bank of China (ICBC), China Development Bank (CDB), and Bank of China (BOC) – have raised a combined €2.8 billion (US$3.3 billion). Although all these transactions also comprise tranches of other currencies (predominately US dollar), all three issuances are listed on at least one European exchange where secondary market trading take place.
These banks also share a similar marketing pitch – all deals were certified with Climate Bonds Standard, a globally accepted benchmark. With the exception of BOC the proceeds were all raised to support projects related with China’s Belt and Road Initiative.
“Certifications and second party opinions are giving international investors more comfort towards Chinese issuers’ green bonds,” said Dominique Duval, head of sustainable banking for Credit Agricole CIB based in Hong Kong. “By getting certified, Chinese issuers are showing potential investors their internal green bond framework adhere to the best international standards.”
Chinese issuance of offshore euro-denominated green bonds has jumped 263 per cent year on year to US$2 billion up to November 9 this year. This accounts for roughly a tenth of the volume of yuan green bonds issued in the domestic market.