Green bond sector sprouting up nationwide
"As environmental and social problems become increasingly prominent globally, the society needs to guide more investment toward green, social and sustainability projects. About 11 percent of asset owners have taken climate change as an important factor affecting their asset allocation decisions, and the number will keep rising," Liu said.
BOC has issued green, social and sustainability bonds－debt instruments whose funds are exclusively allocated to financing new or existing green or social projects or a combination of both－in the offshore market since July 2016, with a total volume of about $9 billion, including green bonds worth $8.3 billion.
The issuance of environmental, social and governance-themed, or ESG, bonds will become a priority for Chinese companies as they expand globally, said David Mao, managing director of Asia debt capital markets at Citi.
"As international investors have raised the requirements for ESG, and credit ratings agencies are placing greater emphasis on ESG-related risks, Chinese companies must follow international standards and play by the rules to boost their own development," Mao said.
Last year, China issued ESG bonds worth $8.9 billion overseas, accounting for 4 percent of the volume of China's offshore bond issuances in foreign currencies. The percentage is expected to increase to 10 percent in the next few years, he added.
Looking ahead, the volume of international green bond issuances will hopefully maintain the growth momentum, with the gradual containment of the pandemic, the continuous launch of policies promoting green bond issuances, and deepened cooperation on standards, investment and research of green bonds. Green bond issuers will further expand, and green bonds will become more diversified in terms of types, industries and regions, said the China Lianhe report.
In the meantime, domestic green bond market institutions will keep improving as the unification process of China's green bond standards had been accelerated and made huge progress last year. With the country pushing forward with the building of mechanisms for green finance standards, the synergy between standards for green bonds and green lending will hopefully strengthen further.
After the economy fully recovers, the country will rapidly press ahead with green projects, and demand for green bond financing will further increase. Besides, as more than 270 billion yuan of green bonds will reach maturity this year, the need for refinancing via green bonds will increase to some extent, the report said.
Several PwC partners from across a range of business areas said the goal of net zero emissions, which means that human-caused greenhouse gas emissions must be removed from the atmosphere through reduction measures, will be a big driver for the ESG sector in 2021, as governments and corporations move from idea to implementation.
They said green bonds and funds will continue to dominate ESG as an asset class. However, large financial institutions will start to innovate and create a more diverse range of ESG products. As banks incorporate ESG factors into their credit risk management, they will become green advisers for their clients. They will reach out to their borrowers in order to assess their ESG performance, including climate mitigation and adaptation plans, the PwC partners said.
By the end of 2020, the outstanding balance of green loans offered by 21 major banks in China amounted to 11.5 trillion yuan, said Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, at a news conference on March 2.
Industrial Bank, for instance, had provided 2.91 trillion yuan of green financing to 29,973 enterprises by the end of January. Every year, green projects supported by the bank are expected to save 30.5 million tons of standard coal and 410.47 million tons of water, to reduce 84.99 million tons of carbon dioxide emissions, 998,100 tons of sulfur dioxide emissions and 119,200 tons of nitrogen oxide emissions, and to comprehensively utilize 45.96 million tons of solid waste.
