‘China – the game changer’ was a phrase that recurred in several articles in March that reported on the growing climate awareness of the political elite in China. They also reported on the key reform recommendations that Climate Bonds Initiative, IISD and the Chongyang Institute for Financial Studies at Renmin University of China put forward to the Chinese policy makers in the whitepaper released in March.
The emerging market flavour of the digest in March is amplified by the coverage of developments in India (2nd green bond issued) and potential bond issuance from UEA.
Update to the Green Bonds Principles and the standards for green bonds were high on the media agenda too.
China – the game changer
Forbes, China and corporates drive green bond market to new heights, Mike Scott
Mike Scott calls green bonds ‘one of the success stories of 2015’ and suggests that China could play a game changing role for the market – similar to that of corporates in 2014.
The Climate Bonds Initiative has just issued its own report on how to grow the market in the world’s biggest emitter of greenhouse gases. (…) China is grappling with environmental challenges that are different to those of the mature economies in Europe and the US,” said Beate Sonerud, policy analyst at the group. “While climate change is high on the agenda in China too, the green challenge here is much broader: for example air pollution, contaminated soil and clean water. Green bonds will be part of the financing solution to those challenges.”
Financial News, China touted as 'game changer' for green bonds, Matt Turner
Matt Turner talks about a boost that China could provide to the green bonds market as its political elite intensify the focus on sustainable initiatives.
A report published on Tuesday by the Climate Bonds Initiative and the International Institute for Sustainable Development said: "The support for green bonds amongst China’s policymakers is strong because, with judicious government support, green bonds can help address some of the financial system issues: boosting bank lending, providing longer term capital and becoming more efficient with public capital."
Climate Wire, Half-trillion-dollar green bond market, led by China, looks for a regulator, Benjamin Hulac
A broad overview of the potential for China to successfully execute the large scale ‘green’ overhaul of its infrastructure. The author, describing the country as the fertile field for financial tools such as green bonds, outlines the recommendations put forward to the Chinese policymakers in our report.
In a call from Beijing, Sean Kidney said the Chinese government is pushing for market openness and aggressively moving forward with green infrastructure plans, such as high-speed rail and solar power projects, instead of waiting for international action.
"The talk about change is amazing," he said. "The word green is sprinkled" in the majority of Chinese government policy papers, he added.
Reuters, Transparency the key for burgeoning Green bond market, Mariana Santibanez
A story highlighting the importance of maintaining the investor confidence in the green bonds market also mentions China as the most promising area for growth.
The real game-changer could be when Asia - and particularly China - enters this sector with conviction. China needs a hefty amount of funding to fund green development, as it attempts to repair the damage from the heavily polluting industries that have fuelled its rapid economic growth. A report by the Climate Bonds Initiative this month cited official Chinese data as saying the country would require annual investment of Rmb2trn (US$322bn).
The Fifth Estate, Sean Kidney on the unstoppable great green wave, Tina Perinotto
Sean Kidney met with the editor of the Australian Fifth Estate in Sydney and shared insights to Climate Bonds Initiative’s efforts to push forward the green agenda in China.
Climate Bonds Initiative (…) on Tuesday released a new report with recommendations for how Chinese policy makers can grow the green bond market. Sean Kidney’s confident there is no stopping a green finance giant in that country. “In China the government wants to green their economy,” he says. The drivers – and methods – are solidly pragmatic.
Vice News, Investors See Green in Financing Clean Energy Projects, Matt Smith
Vice News’ first green bonds coverage has got a China focus.
"The Chinese government has bought hook, line, and sinker into making their economy green," Kidney said. That includes not only efforts to reduce their carbon emissions from power and transportation, but to rein in the notorious smog that led Beijing's mayor to declare that the capital of the world's largest nation "is not a livable city."
"The leaders live in the same cities, you know," Kidney said. "They breathe the same air. They get it."
Investment & Pensions Europe, Green bond market set to grow despite oil price slump, says S&P, Jonathan Williams
Standard & Poor’s report; ‘Corporate Bond Market Shows Its Green Shoots’ was widely covered in the media. Jonathan Williams @ IPE notes the game changing role that S&P envisioned for China:
The rating agency’s report argued that market growth would come from corporate and municipal green bond issuance but said the Chinese market’s embrace of the concept would be a “game changer”.
Its prediction came the same day as the Climate Bonds Initiative and the International Institute for Sustainable Development launched a report in Beijing to promote the growth of green bonds in China by setting up a green bond market development committee to review market standards, among other things.
Business Green, Corporate green bonds could hit record $30bn in 2015
Business Green covering the Standard & Poor’s report highlights predictions for China to become the main area for growth of the market and the Climate Bonds Initiative’s 5-step ‘how to-guide’ for Chinese issuers.
Particular growth could come in China: as the government looks to tackle pollution and reduce its carbon intensity it could encourage companies to raise funds through issuing bonds to spread the risk in the banking system, S&P says. The CBI has today issued a five step "how to" guide for green bond issuers in China as well as advice for policy-makers to help bring forward the market.
IFR, SSA: Portugal considering euro bond, possibly next week, Abhinav Ramnarayan
In its bonds market update, IFR talks about update to the Green Bonds Principles as well as the game changing impact that the ‘Asian Giant’ would have on the market if it enters green bonds market ‘with conviction’.
China needs a hefty amount of funding to fund green development, as it attempts to repair the damage from the heavily polluting industries that have fuelled its rapid economic growth.
A report by the Climate Bonds Initiative and the International Institute for Sustainable Development this month cited official Chinese data as saying the country would require annual investment of Rmb2trn (US$322bn).
Also, extensive coverage of the Climate Bonds Initiative, IISD and Chongyang Institute for Financial Studies at Renmin University of China whitepaper in the Chinese outlets:
- Economic Information-XinhuaNet, RDCY: 2 trillion RMB investment per year is needed for China's green development
- China Economic Times, First Report on China Green Bond Market get Launched
- China Economic Herald, First Report on China Green Bond Market get Launched
- People.cn, First Report on China Green Bond Market get Launched to Lverage Financial Tools and Promote Ecological Civilization
- Xinhua.net, First Report on China Green Bond Market get Launched to Lverage Financial Tools and Promote Ecological Civilization
- Guangming, First Report on China Green Bond Market get Launched
- Finance China, First Report on China Green Bond Market get Launched
- China Economic Net, First Report on China Green Bond Market get Launched
- Chongyang Institute's reporting of green bonds paper launch
Worth noting; China’s newswire, China Development Gateway, published the full version of the whitepaper: ‘Growing a green bonds market in China: Key recommendations for policymakers in the context of China’s changing financial landscape’ as well as the ‘How to issue a green bond in China’ guide.
Standards, Green Bonds Principles, Transparency
Financial Times, Soaring green bond growth raises need for standards, Sophia Grene
FT’s Sophia Grene spoke to bankers, investors and other players preoccupied with the growth the green bonds market. They discussed the benefits of investing in green, transparency and the need for Standards that will guide the market. The result is well worth reading.
And the investment must be profitable. “This is not investing a foundation’s money, it’s balance sheet money that we are talking about.”
Green bonds in their current form ticks all these boxes neatly. But that form is not set in stone. In fact, no aspect of green bonds is set in stone, which may be at the same time one of the biggest drivers of market growth and possibly one of the risks to the overall market
IFR, Green Bonds: Stand up or die, Keith Mullin – also Green Bonds Principles here
Keith Mullin comments on the annual conference of the Green Bonds Principles and boldly calls for the green bonds market players to establish clear standards that will guide the issuers, investors and ‘put the market on a solid footing’.
I’m a little perplexed by the market’s unwillingness – or fear – to tighten standards to the point that they become rules. Everyone speaks of the market needing firm standards on all sides to put it on a solid footing. But at the same time everyone seems visibly afraid of setting standards too high or making rules of the game too complicated or expensive for fear of killing the market.
Global Capital, Investors are debating green bond standardisation, Christina Khouri
Global Capital was proliferated with stories about green bonds in March. Christina Khouri gives voice to investors worried about bonds that may label themselves as green without presenting true environmental benefits.
Advocates of standardisation say that it would allow investors the ability to make quick and clear decisions as to which investments are truly green.
Investors do not always have the skills to be able to do environmental due diligence, argued Sean Kidney, chief executive of the Climate Bonds Initiative. “Standards allow for comparability and fast trading, which is essential for growth and development of the green bond market,” he said.
Environmental Finance, Green bonds face key year, Peter Cripps
Environmental Finance’s Peter Cripps analyses what the green bonds market needs to continue its exponential growth from 2014: he says it needs to become more robust, more mature, and more standardised.
Sticking a green label on a bond is a bold act. It makes a strong claim that what lies beneath the packaging is in some way virtuous in its environmental impact.
Because such a bold claim has been made, it must be expected that people will hold it up to scrutiny.
A green bond needs to be underpinned by adequate research, processes for measuring and reporting – and crucially, thought – put into it, so that it is robust enough to withstand having all kinds of stones thrown at it.
Wall Street Journal, Making a green bond, Mike Cherney
Mike Cherney @ Wall Street Journal explores how a bond turns ‘green’; how do investors determine eligible assets, what level of diligence they need to undertake and what are the available frameworks that can guide them.
The investors warned that certain projects, such as energy efficient oil-sands operations, large-scale water or nuclear power plants, and even efforts to reduce greenhouse-gas emissions from coal plants, may benefit the environment in certain ways but harm it in others. The investors said they would “exercise additional diligence” in assessing whether green bonds financing those projects are truly green.
Global Capital, As green bonds grow, Principles are updated, Jon Hay
Jon Hays summarises the updates to the Green Bonds Principles revealed at the ICMA Green Bonds Principles Annual Conference.
The first update of the Green Bond Principles (GBP) has been revealed, as the green bond market looks forward to another strong year of growth in 2015 and more robust institutional underpinnings.
Water World, Green Bonds: Are Your Projects a Good Fit?, Sarah Fister Gale
Water World encourages issuers in the water sector to label their bonds as ‘green’ - it provides a testimony from DC Water that issued a 100-year green water bond offering last July and received an amazing interest from investors. As the water projects are not green by default, the need for defining what assets can qualify is highlighted:
To maintain the integrity of the label, Ceres, WRI and the Climate Bonds Initiative along with other industry groups are developing a voluntary Climate Bond Standard for water, which will help define what kinds of projects should be included in a green bond offering and what criteria investors and issuers can use to assess those projects.
Agri Investor, CBI; Agri & forestry green bonds could be available in six months, Louisa Burwood-Taylor
Agri Investor reports on the launch of the Agriculture & Forestry Industry Working Group set up under the Climate Bonds Standard.
Agriculture and forestry-related projects could start issuing climate bonds as early as the autumn, according to Justine Leigh-Bell, manager of the standards program at the Climate Bonds Initiative (CBI). The CBI, a not-for-profit organisation focused on mobilising the bond market for climate change solutions, is getting closer to establishing criteria for climate bonds in the agriculture and forestry sectors after an industry working group met for the first time earlier this month
Reporting of the Climate Bonds Standard for Bioenergy public consultation:
ENDS report, Bioenergy sustainability standard created for investors, Simon Roach
ENDS report coverage of the Climate Bonds Standard for the bioenergy investments released for public consultation earlier in March.
The development, run by the Climate Bonds Initiative (CBI), is significant as bioenergy is often criticised for poor net environmental impacts, such as when biomass plants import wood pellets from across the globe, generating transport emissions.
The Sustainability Report, Climate Bond Standard releases draft bioenergy criteria, Rachel Alembakis
The committee has determined that bioenergy investments must deliver greenhouse gas mitigation potential, environmental, and social sustainability.
SeeNewsRenewables, Green bond criteria presented for biomass, biofuel projects, Tsvetomira Tsanova
More specifically, biofuel and solid biomass projects need to demonstrate at least 60% and 70% reduction in emissions, respectively, as compared to local baselines.
New bonds
Global Capital, Landmark India Exim deal to drive green bond boom, Rev Hui
India’s green bonds market is taking off for real; Global Capital reports on the latest green bond from India Exim – country first’s dollar denominated green bond. An interesting article provides an in-depth look into market growth challenges posed by the shortcomings of the India’s bond market; lack of liquidity, low credit ratings, small size of individual issues and lack of large institutional buyers.
Indian authorities, though, are aware of these issues and a number of measures are currently being considered.
First on the list is an exchange risk liquidity facility for green bonds, through which the government will provide support by using its reserves. This will help reduce the cost of hedging, especially when the Indian rupee undergoes a period of large fluctuations
Corporate Knights, Should a Thai oil company be allowed to issue a green bond?, Jeremy Runnalls
The first green bond form an oil company caused the controversy-filled stir in the media. Corporate Knights say the Bangkchak Petroleum’s rollout of a green bond highlights the growing pains being experienced in the nascent industry.
The National, UAE set to be the first to offer green-energy sukuk, LeAnne Graves
The National reports on big news coming out of UAE – the country is set to be worlds’ first issuer of green sukuk.
The UAE is expected to issue the world’s first Sharia-compliant bond aimed at financing green energy projects this year, possibly as early as next month, according to industry experts.
“We are going to get one, possibly two [green sukuk], in the UAE in April,” said Sean Kidney, the chief executive and co-founder of the London-based Climate Bonds Initiative (CBI).
Islamic Finance News, The grass is always greener? Environmental Sukuk take the stage
Also, Islamic Finance News reports on the Gulf’s renewable energy race that’s likely to see UAE as the first issuer later this year.
The potential for a green Sukuk has long been discussed and in recent months has gained serious traction, with a Green Sukuk Working Group set up in the UAE to design a transaction in compliance with the Climate Bond Standards created by the Climate Bonds Initiative.
Arabian Business, UAE set to offer first sukuk to fund green energy projects, Sarah Townsend
The UAE is expected to issue the world’s first Sharia-compliant bond to finance renewable energy projects. A sukuk intended for green energy projects could be issued in the UAE as soon as April.
Policymakers – get your act together
Nature, Economics: Support low-carbon investment, Nathan Fabian
Nathan Fabian, CEO of the IINCC explains the role of governments in mobilizing private finance and lists policies they could implement to make the shift to a low carbon economy profitable.
How should the low-carbon economy be financed? Robust banking systems, transparent governance and stable currencies are baseline requirements. Predictable long-term energy policies and emissions-reduction frameworks are an essential overlay. If any of these aspects are missing, publicly funded measures can assist. Governments can also raise awareness, build partnerships and change financial regulations to increase private finance flows.
The Times of India, Greenbacks for Greening, Naina Lal Kidwai
An interesting article by Naina Lal Kidwai, head of HSBC India. She highlights India’s urgent need to develop financial system that promotes ecologically sustainable industry and she sets a number of recommendations for policymakers, banks and investors to make sure that country delivers on its potential. Green bonds are highlighted as a route to provide green project financing.
Green bonds could provide innovative routes for green project financing. The market for these innovative products needs to be developed with urgency to allow long term finance into sustainable development priorities. The green asset class will emerge as the raison d`etre of the future corporation. It is time the financial sector realigns itself towards the green asset class and the green economic agenda of the future.
European CEO, Green bonds boost Europe’s sustainability efforts, Matt Timms
Look at the green bonds market growth from the European perspective.
The developments in the European green bonds market are closely in keeping with ambitious EU renewable and energy efficiency targets, which stipulate that 20 percent of the bloc’s consumed energy should be provided by renewables by 2020. Add to that a recent deal to cut greenhouse gas emissions by at least 40 percent by 2030, and the importance of sustainable infrastructure investment in realising these ambitions is clear.
And more in market analysis
Environmental Finance, What is the future of high yield green bonds, Aaron Franklin and Francesco Lione (Latham & Watkins)
An Interesting article in Environmental Finance focused on high yield green bonds – authors predict a significant growth for this sector of the market.
As green bonds move down the yield curve, investors will have access to a more robust spectrum of credits. By enhancing the value of the high-yield bond covenants to issuers, investors might be able to equip themselves with a more robust set of green investing tools.
IFR, International Financing Review Green Bonds Roundtable
In February, Keith Mullin of IFR, gathered around the table representatives from Citigroup, HSBC, Crédit Agricole, Deutsche Bank, Morgan Stanley, Commerzbank, S&P and DNV GL and discussed with them greenwashing, green bonds market regulation, external opinions, green project bonds, benefits of issuing a green bonds and more.
Few capital markets developments of recent years have matched the rise and rise of green bonds. The sustainable theme has taken the capital markets by storm over the past year throughout the broad ecosystem of issuers, underwriters, investors, rating agencies, second-opinion providers, industry trade bodies and NGOs
Actuarial Post, Which Bond is best, Craig, Connery, Moore or Green?
Responsible investment charity ShareAction and the Climate Bonds Initiative released an Investor briefing on green bonds and climate bonds in early March. Actuarial Post reports.
The briefing rounds up the key features of green bonds, recent developments in the green bonds market, benefits to investors, and a list of questions pension funds might wish to ask their fund managers and investment consultants regarding green bond opportunities.
A useful update from Renew Economy on green bonds market predictions, latest notable deals and investor appetite.
The climate bond market has jumped 10-fold in two years to $38 billion. By 2020, it could be worth $1 trillion a year, as wind and solar companies, property investors and local, state and national governments tap soaring demand for clean investments.
SeeNewsRenewables, USD 2.4bn green bonds issued in Feb 2015, strong demand for India's 1st, Tsvetomira Tsanova
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Our blogs are written by a team: Sean Kidney, Tess Olsen-Rong, Beate Sonerud, Kazutaka Kuroda, Rozalia Walencik and Justine Leigh-Bell.
