Exploring Growth and Opportunities in the Green Bond Markets

Delve into the burgeoning Chinese green bond market with insights on green bonds growth, sector allocations, Latin American issuance trends, sustainable investment needs in Latin America, China's green bond growth, and global green bond market size comparisons. Discover the significance of Green Panda bonds and their role in promoting sustainable finance.

• Green bonds
• Sustainable finance
• Chinese market
• Latin America
• Green Panda bonds

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1. Green Panda Bonds Opportunities in the booming Chinese green bond market Sean Kidney CEO, Climate Bonds Initiative Shanghai | 30 November 2018

2. Green bonds growth 180 ABS 160 Financial corporate 140 Non-financial corporate Development bank 120 Local government 100 USD Billions Government-backed entity 80 Sovereign 60 Loan 40 20 0 2014 2015 2016 2017 2018

3. More than clean energy Transport 15% Water 12% Waste 4% Buildings 25% Other 10% Land Use 3% Adaptation 3% Industry <1% Energy 38% Cumulative use of proceeds as of November 2018 3

4. USD6.7bn Latin American green bond issuance to date Brazil accounts for 65% of Latin America's green bond issuance Brazil Chile Argentina Costa Rica Colombia Peru Uruguay 5 4 USD Billions 3 2 1 0 2014 2015 2016 2017 2018 November 2018 4

5. Latin American green infrastructure financing needs Global Infrastructure need for greener growth : USD5 trillion p.a. Latin America sustainable investment gap: 3-3.5% of GDP Argentina: USD26bn PPPs debt 2022 via for roads, energy, water, housing Brazil: PPPs for 145 projects with USD40bn of investments; Mexico: BANOBRAS has mapped 300 projects for USD177bn. Colombia: new transport investments USD70bn; new clean energy 1.5GW Green bonds shows capital markets provide a promising financing channel. 5

6. China green bonds growth over past three years 40 35 30 25 20 USD Billions 15 10 5 0 2015 2016 2017 2018 China's issuance (aligned with China definitions only) November 2018 China's issuance (aligned with both China and international definitions) 6

7. Size of RMB vs USD vs EUR green bond markets Globally green bonds issuance 2016-2018 Emerging market green bonds 2016-2018 SEK 4% USD 33% CNY 12% INR 2% EUR 35% EUR 12% CAD 2% MYR 1% Other 7% Other 4% CNY 48% USD 40% November 2018 7

8. Take one Panda bond and use only for green Panda bond: RMB- denominate, issued in China by a foreign entity Green Panda bond: same, except money goes to green 8

9. Green bond guidelines in China Financial green bonds regulated by PBoC = 1. Per-issuance regulatory approval required 2. Projects and assets must align with the Green Bond Endorsed Project Catalogue 3. Issuers strongly encouraged to have external review 4. Proceeds can be ring-fenced or earmarked 5. Quarterly reporting (guidance & template provided) 9

10. Regulation of general panda bonds Issuer qualification Must have issuance experience, solvency, paid-in capital, robust financial performance Application procedure National banks go to PBOC, MDBs go to NAFMII Information disclosure See interbank market rules; information publicly disclosed in Chinese. Issuance within quota Can be in tranches or stand-alone. Custody and clearing Either set up RMB bank settlement account overseas or escrow account through lead underwriter. Investor protection e.g. disclosure of significant events and meetings with bond holders. 10

11. Howto issue a green bond 1. Identify green assets 2. Application to regulator to issue 3. Issue the bond 4. Ongoing reporting

12. Chinese verifiers and underwriters 12

13. Expected developments in the Chinese green bonds market Harmonisation among domestic green bond regulations Further incentives (e.g. proposals for risk weighting in capital ratio requirements) Renewed domestic issuance in 2019, especially at provincial level Further opening of the financial market (e.g. PBOC s green panda bond guidelines) Cooperation with international institutions on green bond standards for Belt and Road Initiative 13

14. More information Climate Bonds Initiative Inter-American Development Bank www.climatebonds.net cn.climatebonds.net www.greenfinancelac.org 14