Why some Chinese green bonds are ‘not so green’ in the eyes of international investors
Chinese issuers are now complying with domestic and global requirements
Green bonds are no different from regular bonds with one exception: proceeds are earmarked for projects with environment benefits, primarily, climate change mitigation.
However, independent reviewers which give second opinion on an issuer’s internal green bond framework, and certification issuer such as the Climate Bonds Initiative (CBI), use different shades of green to express their concerns on the bonds’ overall environmental impact. These shading also indicate the extent to which the bonds align with global standards or investors’ expectations.
Currently, the CBI is the only organisation certifying green bonds. On its website, green bonds are categorised into three shades of green.
The light green colour represents green bonds that are not aligned with its definitions, but are aligned with China’s definitions. CBI does not include ‘light green’ bonds into its analysis and market statistics.
The CBI uses a library of sector-specific criteria to determine eligibility of projects and assets for certification. Currently, certifications are available for solar, water, low carbon building and transport, wind, geothermal, and marine renewable energy.
But before Chinese companies’ recent move to raise more foreign-currency green bonds and get their bond certified by CBI, many in the past had been predominantly following domestic Chinese standards.