China’s central bank briefs LATAM finance officials & development banks on green finance & green bonds: With a bonus presentation from Sean Kidney
By our new Climate Bonds China staffer, Ivy Lau
Meeting in Beijing
In the headquarters of China’s central bank on Beijing’s Chang’an Avenue, a delegation from Latin America countries filled the boardroom early this week, seeking a briefing on China’s experience in developing a green bond market and green finance.
Fuelled by China’s commitment to the UN Paris Agreement, development of green finance has become a top agenda item for Chinese policymakers. China’s Green Bonds market last year went from zero to hero (it’s now the largest in the world!), making China an intriguing exemplar of financial activities going green.
During the briefing, senior officials from the People’s Bank of China (PBOC) and other regulators showcased China’s approach to green finance, and discussed how it’s been dealing with challenges that have arisen.
Yin Yong, Deputy Governor of PBOC, and Ma Jun, Chief Economist of PBOC Research Bureau were the lead speakers.
Ma Jun noted that:
“Green bonds already make up 2% of Chinese bonds, whereas globally the figure is less than 0.2%. But the potential is huge, because 20% of investments in China need to be green to meet our national objectives. So we expect the green bond market to continue to have very strong growth.”
Ma Jun said that China’s green ambitions will need international as well as domestic capital. There are some differences between Chinese green definitions and international accepted definitions due to China’s urgent air pollution priorities, but about 90% are common.
That means that overseas investors can choose from a large portion of Chinese green bonds that are internationally recognized,
China Banking Regulatory Commission’s Ye Yenfei presented on their Green Credit Guidelines; the head of PBOC’s Financial Markets Division, Cao Yuanyuan, explained the PBOC’s green bond regulations.
Climate Bonds CEO Sean Kidney provided an update on global green bond markets and practice.
Sean Kidney said he expected 2017 to see: “a lot of international collaboration. We have seen commitment from the EIB and China Green Finance Committee to look at harmonization of green bond guidelines between EU and China, and we will see this year the growth of bi-lateral green finance agreements.”
He also noted that green bond issuance opens the door to other sorts of green finance initiatives. “In the end, it’s not just fixed income we need, but equity, bank lending and sovereign support. Green bonds are just the start.”
The LATAM Delegation
Led by the InterAmerican Development Bank, the LATAM delegation is made up of representatives of national development banks from Latin America and the Caribbean, including from Argentina, Brazil, Chile. Peru, Brazil, Colombia and Mexico, as well as a smattering of regulators. It is spending a week visiting green finance organisations in Beijing and Shanghai.
Representatives of the delegation said that Latin America aims to strengthen its partnership with China in supporting climate related financial activities. In terms of green bonds, members of the delegation were very keen to learn more about implementations of green bond standards, regulations, fiscal incentives, risk management and certification.
It was a lively Q&A.
Look soon for more on the spot China updates from Ivy,