A “new force” has come onto China's green bond market. Latterly, Industrial Bank (IB) has scored again with its first green private placement note.
It is understood that the issuer, Tus S&T Service Co., Ltd., plans to launch a fund to the value of ￥150 million for the second phase of the expansion and improvement project of Beichen Dashuang Sewage Plant in Tianjin. Nearly 7300 tons of chemical oxygen demand (COD) and 647.2 tons of ammonia nitrogen are estimated to be whittled down following the completion of the project, which will yield a welcome improvement to the water in the region.
This is another pioneering program of IB, the first Equator bank in China, in the areas of direct financing tools for green industry, such as green bond, green wealth management based on direct financing tools, and green credit asset securitization in recent years. Last month, namely, May 2016, the bank, as the joint lead underwriter, has successfully registered with the National Association of Financial Market Institutional Investors (NAFMII) and issued the first medium-term green notes with an long term option. In January 2016, the bank has sold the first green financial bond in China. In fact, IB had scored the first in more than one area: the first green financing tool based on direct financing and the first green credit assets securitization project were the case in point.
Since the creation of green bond market at the end of 2015, the circulation of green bonds has increase briskly in China: in the first 5 months in 2016, the green bonds authorized have exceeded ￥100 billion, and the already-issued bonds have hit ￥55 billion. Experts estimated that green bonds in China are expected to reach a value of 5.7 trillion by 2020. With a normally sufficient reserve of green bond products, the bank has achieved intent of cooperation with many influential organizations specializing in clean production and environmental protection, and a number of pilot projects, including those connected with Nantong Economic & Technological Development Area Corporation, Huai'an Xincheng Investment and Development Co., Ltd. and Tianshan Xinjiang Rural Commercial Bank, are progressing remarkably.
However, the green bond market in China remains to be fully developed on the whole, and there leaves something to be desired in such areas as the identification of green projects, information disclosure, the appraisal or certification of independent institution, etc.
In this regard, Lu Zhengwei, the Chief Economist of IB and Vice President of IERCC proposed four suggestions: First, a united system of identification criteria for green project catalogue should be established, and the Catalogue of Green Bond Supported Projects and the Guidelines for Issuance of Green Bonds should allow mutual recognition. Second, the rules for the reporting and disclosure of “second opinions” should be specified and the admittance and identification rules for independent third party certification institutions should be amended. Third, the rules for the disclosure of green bond information should be remodeled with a view to establishing a tracking evaluation system. Fourth, attentions should be directed to the risks of green industry itself, and a boundary should be defined between non-profit green projects and profit-making ones to uphold the equity evaluation logic of existing bonds.