Growth and Opportunities in the Green Bond Markets

Green Panda Bonds
Opportunities in the booming
Chinese green bond market
 
 
Sean Kidney
CEO, Climate Bonds Initiative
Shanghai
 
| 30
 
November
 
2018
undefined
 
Green bonds growth
undefined
 
 
3
 
More than clean energy
undefined
 
4
 
USD6.7bn Latin American green bond issuance to date
undefined
 
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
 
Latin American green infrastructure financing needs
undefined
 
6
 
China green bonds growth over past three years
undefined
 
7
 
Size of RMB vs USD vs EUR green bond markets
undefined
 
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
undefined
 
“F
inancial
 green bonds regulated by PB
o
C =
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
 
G
reen bond 
guidelines
 
in
 
China
undefined
 
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 
pu
blicly disclosed
in Chinese.
 
10
 
Regulation of general panda bond
s
 
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.
 
How
 
to
 
issue
 
a
 
green
 
bond
 
3. Issue the bond
 
4. Ongoing reporting
 
1. Identify green assets
 
2. Application to regulator to issue
undefined
 
12
 
Chinese
 
verifiers
 
and
 
underwriters
undefined
 
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
 
Expected developments in the Chinese green bonds market
undefined
 
Climate
 
Bonds
 
Initiative
 
www.climatebonds.net
cn.climatebonds.net
 
 
 
14
 
More
 
information
 
Inter-American Development Bank
 
www.greenfinancelac.org
 
 
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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

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