Growing from a retail-scaled market to the world’s largest market of green bonds, our green bond market is witnessing more varieties of green bonds. Recently, the first financial leasing green bond (PPN) in the domestic interbank market and exchange market underwritten by Industrial Bank (IB) - phase I private placement note of State Power Investment Ronghe Financial Leasing Co., Ltd. for 2017, was successfully issued.
According to the report, this bond has a registered capital of RMB 2 billion, the initial offering of RMB 1 million. All the funds raised will be used in the financial leasing projects of clean energy such as wind power, hydraulic power, solar photovoltaic power system and etc. Compared with traditional thermal power projects, the target projects of this bond will save 774,000 tons of standard coal each year, which equals to the reduction of 2.068 million tons of CO2 emission.
As introduced by Lin Shu, the general manager of the Investment Bank Department of IB, this bond applies PPN mode, which means it lowers the threshold for enterprises to participate in green projects while expanding the scale of green bonds registered by enterprises. While the bond registration process has been simplified, the mode of private placement is advantageous in introducing risk-seeking investors and setting up a diversified structure of investors, so as to help enterprises break the dilemma of financing and offer a greater space for them to grow in a green way.
Although the green bond market of China started late, but it has developed rapidly in size with the help of ever-improving top design. In 2016, the issued amount reached RMB 238 billion, accounting for 39% of the globe, making China the largest market of green bond in the world.
As the pioneer of green finance in China, IB also takes one step ahead of the market of green bond. Since 2015, IB has successively issued China’s first green credit asset-backed securities, launched China's first green finance debt, registered and issued China’s first long term cum rights medium-term notes, invested in China’s first green ABS of non-listed company and etc.
According to the prediction by experts from the Organization for Economic Cooperation and Development (OECD), the amount of issued green bonds across the globe now only accounts for 0.2% of the total amount of issued bonds, which represents ten-time growth space in the future. Due to the strong externality of green projects, green bonds are facing challenges such as low commercial profits and lack of attraction. For that, IB's chief economist Mr. Lu recommended that first we should define the position of green bonds in prior debt repayment so as to lower the credit risks and support green development; second we should set a lower risk weight for green financing so as to reduce the cost of green financing.