CDB looks to raise $3b from green bond sale

The China Development Bank's plan to sell 20 billion yuan ($3 billion) of carbon-neutrality green bonds from next week reiterates the policy bank's efforts to help the country achieve its carbon neutrality goals, experts said.

The new product is the largest valued green bond for carbon neutrality. The proceeds will be used for wind power and photovoltaic projects. The bond is also China's first carbon neutrality bond acknowledged by the Climate Bonds Initiative, an international organization that promotes investment in low-carbon and climate resilient projects and assets.

The presale of the bonds began on Friday and will end on Thursday. Investors from all over the world will be able to purchase the product through the bond connect program which was launched in July 2017 to provide overseas investors access to the Chinese mainland's interbank bond market. The Shanghai Clearing House will release for the first time a carbon neutrality bond index based on the new product.

CDB said in a news release that themed green bonds for the protection of the Yangtze River and the ecological reserve in the Yellow River basin are in the pipeline, which shows the bank's commitment to facilitate China's high-quality economic growth and green transformation. By the end of 2020, the bank had issued green bonds worth 50 billion yuan. The bank's green credit balance came in at 2.2 trillion yuan.

A total of 175.8 billion yuan worth of green bonds had been registered with the Shanghai Clearing House by the end of last year, most of which were green debt financing tools, green asset backed notes, and green bonds.

China's first batch of six carbon neutrality themed green bonds were registered on Feb 9. Six companies including China Three Gorges Corp, China Southern Power Grid and State Power Investment Corp Ltd were the issuers of the bonds, all of which are mid to long-term notes with a maturity of at least two years. The total financing of the six bonds came in at 6.4 billion yuan and was mostly used to fund wind power, hydropower, photovoltaic and green construction projects.

As an important part of green bonds, carbon neutrality bonds further narrow down the sectors where the raised funds will be used, said Ma Jun, director of the Green Finance Commission under the China Society for Finance and Banking. The novel kind of bond chooses targeted projects in more precise ways while information disclosure is more transparent. Therefore, more financial resources will be directed to low-carbon businesses more efficiently, he said.

In September 2020, China announced that country's carbon dioxide emissions will peak before 2030, and it will achieve carbon neutrality by 2060. The Government Work Report approved on Thursday also mentioned that energy consumption and carbon dioxide emissions per unit of GDP should be lower by 13.5 percent and 18 percent, respectively, during the 2021-25 period.