US investor alert: Asian and European institutional investors show appetite for China green bonds
A mixed U.S. dollar and Chinese Yuan Renminbi (CNY) three tranche green bond issuance to the value of US$995 million announced last week by the Agricultural Bank of China saw Asian investors accounting for 94 percent of demand, with the rest going to European investors. All three bonds will be listed on the London Stock Exchange for trading next week – on October 22nd.
“This is a welcome development in the international green bond market. The Agricultural Bank announcement reflects growing Chinese interest in green bonds as an international funding vehicle for low carbon and climate based investment” said Sean Kidney, CEO of the Climate Bonds Initiative (@ClimateBonds), an investor-focused not-for-profit promoting large-scale investment in the low-carbon economy.
“The oversubscription, ranging from four to nine times is a reflection of institutional investor appetite for Chinese sourced green bonds” he added.
Agricultural Bank of China is China’s third largest listed lender trading on the Shanghai and Hong Kong exchanges. The announcement of the bond was first reported in Finance Asia.
It is the first off-shore Renminbi denoted green bond and as such a ‘trial balloon’ for future CNY based green bond issuance, said Mr. Kidney.
“The Peoples Bank of China (PBoC) has made it clear it will be very supportive of offshore CNY green bond issuance – we expect to see a lot more, which will add a very green flavour to the growing internationalisation of the Renminbi” he added.
Earlier this month the United Nations Secretary-General Ban-Ki Moon launched the U.N. Trends in Private Climate Finance report. at the World Bank-IMF annual meeting in Paris, which references China’s emerging role in green bonds (Chapter 3).
Agricultural Bank of China has committed to outline the end use of the proceeds of the bonds, thereby ensuring an annual reporting process. This will provide “important transparency and disclosure to the bond issues” said Mr. Kidney, adding that it would also set “an excellent example” for future Chinese green bond issuers.
Data on the growth and depth of international green bonds since the market commenced in 2007 became available earlier this month from the Climate Bonds Initiative on the Non Actor State for Climate Action (NAZCA) platform hosted by the UNFCCC.
NAZCA was launched in December 2014 at the U.N. climate change conference in Lima by Manuel Pulgar Vidal, President of COP 20, and is intended to showcase the growing range of climate and carbon commitments and actions by non-state stakeholders – including investors – in the run up to COP21 in Paris in December this year.
Comprehensive data highlighting every non-state actor green bond issuance normalized into US$ reveals the issuers to include companies, cities, municipalities and banks. A long term overview will now be available for the first time into the types of assets and projects financed through each green bond – from renewable energy to sustainable infrastructure and sustainable water.
Mr. Kidney described the data launch on the UNFCCC climate platform as “a far-reaching step for investors, bond issuers and policy makers.”
“Long term institutional investors, global asset owners, managers and bond issuers looking at future investment opportunities that green bonds can provide will be able to track market progress, where bond proceeds are flowing and the latest initiatives via regular updates to the UNFCCC platform from the Climate Bonds Initiative” he said.
Public transparency around market trends via this global platform signals “another stage in building a robust investment pipeline for green bonds” he added.
Dina Medland is an independent writer, editor and commentator with a strong focus on issues around corporate governance, ethics, the workings of the boardroom and sustainable business. She is on the team of contributors to @ForbesEurope and is an ex-Financial Times staff member who has been a regular contributor in recent years. Further details about her background and a portfolio of work – including her commercially sponsored blog ‘Board Talk’ are available on her website http://www.dinamedland.com