How to Issue a Green Panda Bond Lily

How to Issue a Green Panda Bond Lily Dai, Climate Bonds Initiative

What is a Green Panda Bond Green panda bonds are essentially the same as other panda bonds (RMBdenominated bond issued in mainland China by a foreign entity), except that: • • • Issuer labels bonds as “green” Proceeds are earmarked for green assets or projects Issuer tracks and reports on the use of proceeds to ensure compliance

China’s Green Bond Market

China’s Green Finance Roadmap 2012 CBRC’s Green Credit Guidelines 2013 CBRC’s Notice for Green Credit Statistics 2015 Establishment of China’s Green Finance Committee Green bond guidelines from PBo. C and NDRC, and the Green Bond Endorsed Project Catalogue 2016 Kick-off of China’s green bond market Green Bond Pilot Scheme at stock exchanges Guidelines for Establishing the Green Financial System by seven ministries 2017 CSRC’s green bond guidelines NAFMII’s Guidelines for Green Debt Financing Instruments Establishment of five Green Finance Pilot Zones 2018 PBo. C’s guidance on post-issuance disclosure of green bond 2019 AMAC Green Investment Guidelines PBo. C and CSRC’s guidance on green bond external review and verification NDRC Green Industry Catalogue

Opportunities to Issue Green Panda Bonds Existing rules provide clear guidance to ensure market robustness • Issuance process, green definitions, external review and disclosure • Enhance potential issuers’ capacity and market integrity Domestic investors have been supporting the growth of China’s green bond market • Commercial banks are currently the largest investors • Expand public participation in green investment There active service providers in China’s green bond market Underwriters, verifiers, stock exchanges and clearing houses Chinese policymakers are keen on facilitating investment in green assets • Institutional investors (pension funds and insurance companies) to invest in green financial products • Release green investment responsibility reports RMB is being increasingly used for crossborder settlement • Inclusion into the Special Drawing Rights (SDR) and more RMB settlement in BRI countries • China actively invests in other countries

How to Issue a Green Panda Bond

Regulatory System for China’s Bond Market Products Treasury bonds and municipal bonds Central bank bonds/notes, financial bonds Regulators MOF and CSRC PBo. C, CSRC Insurance company bonds Non-financial institution bonds Bonds issued by MDBs PBo. C NDRC, PBo. C, CSRC and MOF Marketplaces Stock exchanges Interbank Regulators CSRC PBo. C OTC PBo. C and CBIRC

Regulations on Panda Bonds Issuer qualification Issuance experience, adequate solvency, capital, corporate governance, risk management, financial performance, credit rating Application and registration procedure PBo. C or NAFMII Information disclosure In accordance with the rules of the interbank market before the issuance and during the term of the bond e. g. proof of issuance approval, bond prospectus, financial statements, qualification to carry out financial services, legal opinion, credit rating Custody and clearing • Use a recognised custody company • Foreign exchange registration process: the opening of accounts, foreign exchange, cross-border remittance, and information filing • RMB bank settlement account overseas or an escrow account in China through the lead underwriter Investor protection • Such as disclosure of significant events and meetings with bond holders • Engage an independent domestic organisation to ensure the implementation

Regulations on Green Bonds

Green Panda Bond Issuance Issuer New Development Bank Beijing Enterprises Water Group China Power Clean Energy Development Hang Lung Properties China Everbright Water Sector Energy Water Energy Buildings Water Amount (RMB) 3 bn 700 m 800 m 1 bn 400 m Date issued 2016 2017 2018 External review EY Syn. Tao Green Finance CCXI Lianhe Equator Shanghai Brilliance Credit Rating Coupon 3. 07% 3. 25% 5% 4. 6% Market Interbank Shanghai Stock Exchange

For more information https: //www. climatebonds. net/ London: Lily Dai, lily@climatebonds. net Beijing: Wenhong Xie, wenhong. xie@climatebonds. net Hong Kong: Ivy Lau, ivy. lau@climatebonds. net