If recent trends are anything to go by, the Chinese green bonds market is set for a massive expansion, as the country continues to expand its renewable energy infrastructure amidst a financial markets crisis.
This has been exemplified by the Agriculture Bank of China, which issued its first green bonds sale in London, and raising around $1 billion. The dual currency bonds will be listed on the London Stock Exchange, and proceeds from the issue are set to finance renewable energy and energy efficiency projects.
The Bank offered bonds worth 600 million Yuan ($94.53 million) for a duration of two years at a coupon rate of 4.15%. Since the coupon rate on these bonds was quite attractive, it was oversubscribed several times over. Against a supply of bonds worth 600 million Yuan, investors proposed to acquire bonds worth 4.9 billion Yuan. A majority of the investors were from Asia and public sector banks.
The Bank also offered dollar-denominated bonds in two different segments. One segment worth $400 million was offered for two years at a coupon rate of 2.125%, while the other segment worth $500 million was offered for a period of five years at a coupon rate of 2.75%.
China’s green bonds market is very young, with the first green bond in China issued in July this year. Wind energy firm Xinjiang Goldwind Science & Technology received order for $1.4 billion for a $300 million bonds issue, with the company stating that it would use the proceeds from the issue as working capital and for refinance purposes.
Earlier this year, the Climate Bonds Initiative released a report with recommendations on how to increase the green bonds market in China. The organisation stated that green bonds can play an important role in “a shift from that short-term to longer-term debt” which would support economic stability. Other recommendations included: state-owned companies should be encourage to issue green bonds; investors should be offered tax incentives for investing in green bonds; and implementing a system to verify if the proceeds from the green bonds are being invested in clean energy projects.