China’s first official green bond offering has raised $300 million after pricing last week, providing issuer Xinjiang Goldwind with general working capital.
Reuters reported the news earlier this week, including the fact that the $300 million offer was five-times oversubscribed, receiving orders of $1.4 billion. This sets the role of green bonds in China on a strong path, as the country attempts to generate around $1.6 trillion over five years to extricate itself from its worrisome environmental problems.
“We see activity around green bonds in a number of different places, but signals out of China are very strong,” said New York-based Manuel Lewin, Head of Responsible Investment for Zurich Insurance Group, who was quoted by Reuters.
According to an explanatory piece by EY, “Green Bonds are debt instruments, which associate the proceeds of a bond issue to environmental or social activities, creating ring-fenced debt finance for green investments.” Reuters adds that “green bonds are certificates to show that funds raised will be used for environmental projects and are a popular tool for socially responsible investment.”
Green bonds have quickly become a valuable tool in the renewable energy developers toolkit, offering “a new investor base to raise funds.” At the beginning of the year, the Green Bonds Initiative released figures showing that 2014 saw $36.6 billion worth of green bonds issued by 73 different issuers, which was more than three times the figure from 2013. Furthermore, at the time, Sean Kidney, chief executive of the Climate Bonds Initiative, said that he expected the green bonds market to reach $100 billion in 2015.
“I’m very confident we can get a $50bn and cautiously optimistic that we will get a $100bn [market] – that’s what we’re working to as a target,” he said. “Some markets are going to grow very fast from a small base, such as the US municipal market, which we expect to spill over into more issuance in Europe.”
Earlier this month it was again reported by the Green Bonds Initiative that green bonds issued over the past decade had reached $600 billion. Unsurprisingly, though not offered from within China as Xinjiang Goldwind’s green bond issue was, China nevertheless accounted for around a third of the total figure, with the US and the UK responsible for approximately 12% and 9% respectively.