China ups the stakes in green bond push

China is making good progress in aligning itself with international standards for green bonds in order to create a more harmonized framework to attract global investors, says an expert in green and sustainable financing.

Unlike Europe, where green finance is driven by investors, China adopts the top-down, policy-driven approach which boosts the fast development of the country’s green finance market, Guo Xiaofei, director of green and sustainable finance of corporate and investment banking Asia Pacific at Natixis, told China Daily on the sidelines of the 13th Asian Financial Forum in Hong Kong on Tuesday.

In the first half of last year, the total amount of green bonds issued on the Chinese mainland surged to US$21.8 billion — up 62 percent on the same period in 2018.

According to Guo, the contributions came mainly from regional banks and the private sector.

Although nearly half of the entire volume of green bonds issued by the mainland is in line with international standards, the country is making strides in meeting world green finance standards in issuing offshore bonds, Guo said.

In 2018, the G20 sustainable finance study group, led by the People’s Bank of China, continued to advocate green finance worldwide.

Besides, the Network for Greening the Financial System, co-initiated by China, and which is a global network of central banks and supervisory authorities propelling a more sustainable financial system, has brought in more members, further strengthening the collaboration.

According to an annual report on China’s green finance development issued by the PBOC, Chinese green bond issuance exceeded 280 billion yuan in 2018.

Guo said the top sectors in China’s green bond market are energy, transportation and real estate.

“Asian investors are getting more and more aware of green finance,” she said, adding that six Chinese investment organizations have signed up the United Nation Principle for Responsible Investing. “This is a very clear signal sent to the market that Chinese investors are focusing on ESG (environmental, social and corporate governance).”

When structuring green bonds, green loans and sustainable supply chain finance, Guo, who heads Natixis’ sustainable finance activities for the Asia-Pacific market, stressed that green integrity is the key point for issuers that focuses on what can be seen as green and make the structure robust enough.

Meanwhile, issuers should avoid any possible greenwashing that indicates corporations labeling themselves as green financing with no outcome forthcoming, Guo added.

In September last year, Natixis rolled out its Green Weighting Factor as a tool to manage its own portfolios based on their climate impact.

The French investment bank embedded the mechanism into its credit process, and the evaluation kicks ahead of the credit decisions. “Natixis is the first bank in the world to actively manage the climate impact of our own balance sheet,” Guo said.

The lender has developed a set of indicators to monitor the transition of its portfolio.

According to Guo, Natixis has been talking to Chinese regulators to share its experiences and the concept of the Green Weighting Factor to see if it can be embedded in the Chinese market.

Being actively involved in green finance globally, Natixis is the first foreign bank to sign up for the Green Investment Principles for the Belt and Road Initiative to promote green investment in the region.