Climate finance: China says 193 green bonds worth US$35 billion meet EU standards, enhancing lure for overseas investors

The previously issued bonds comply with the common-ground taxonomy (CGT) for climate-mitigation projects, says China’s Green Finance Committee
CGT stamp of approval expands pool of investible green bonds and removes risk of greenwashing accusations, experts say

Business of climate change

Eric Ng

Published: 3:00pm, 17 Jul 2023

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China’s main guidelines issuer for green finance has announced that 193 previously issued green bonds meet the standards of both China and the European Union, a stamp of approval that allows more international investors to back Chinese climate-mitigation projects.

The Green Finance Committee, led by China’s central bank the People’s Bank of China and operating under the China Society for Finance and Banking, said it set up an expert group that spent several months reviewing green bonds issued in China to come up with the list.

The first batch of 193 bonds, which raised 251.3 billion yuan (US$35 billion) between 2016 and this year for their issuers – primarily state-backed public transport and clean-energy companies – fully comply with the common-ground taxonomy (CGT) announced jointly by China and the EU in June last year, according to the committee.

“The Green Finance Committee expert group’s effort is an important innovation to expand the use cases of the CGT,” said the committee’s chairman Ma Jun in a statement on Friday. “This initiative will also help enhance the openness of China’s green bond market to global investors.”

Officers stand guard in front of the headquarters of the People’s Bank of China in Beijing on September 30, 2022. Photo: Reuters

All 193 bonds are traded in China’s interbank bond market and have maturity dates later than March 31 this year.

The CGT is a classification of projects that qualify for issuance of green bonds, which finance projects with environmental benefits, in both China and the EU. After two years of comparison work to identify commonalities and differences between Chinese and EU issuance standards, it so far includes 72 types of projects acceptable by both jurisdictions.

The labelling of bonds that meet the standards of both jurisdictions, including relabelling of green bonds issued in the past few years, expands the pool of investible green bonds for international investors.

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Previously, investors supporting projects that only met China’s definition of “green”, were exposed to risk of greenwashing accusations, for investing in projects where claims of environmental benefit could not be substantiated.

Since the CGT’s launch, many Chinese issuers have issued green finance products in the international market using the CGT as a labelling tool.

“As one of the largest green bond markets, China’s initiative to relabel existing green bonds using the CGT is a great innovation,” said Sean Kidney, CEO of Climate Bonds Initiative, a London-based international non-profit organisation. “It will support increased cross-border flows of green capital and encourage more countries and regions to join the CGT.”

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China issued the world’s largest volume of green bonds last year, totalling US$85.4 billion, according to Climate Bonds Initiative.

The International Platform for Sustainable Finance’s taxonomy working group, co-chaired by China and the EU, developed the CGT.

The working group recently announced its phase two work plan, encompassing a broadening of the CGT’s jurisdictional reach and the expansion of its activity coverage.

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