Asia-Pacific

China: Fossil Fuel Projects No Longer Eligible for Green Bond Financing

The removal of clean coal from the list of eligible projects will make it easier for foreign investors to play a greater role in China’s sustainable debt market.

The PBOC (People’s Bank of China), NDRC (National Development and Reform Commission), CSRC (China Securities Regulatory Commission) and three other agencies have published a new catalogue of projects that are eligible for green bond issuance.

Replacing an earlier version published in 2015, the new catalogue excludes “clean coal” from the list of eligible projects.

According to Reuters, the inclusion of “clean coal” in the 2015 list had put China at odds with global standards, a point of contention for some international investors and many environmental groups.

Last year, Chinese financial institutions provided billions of yuan in green financing to coal related projects, also supporting other fossil fuel projects including the expansion of an oil refiner. According to the FT, over 43 percent of the USD 55.5 billion raised in green bonds in China did not meet global standards.

The removal of clean coal from the list of eligible projects will make it easier for foreign investors to play a greater role in China’s sustainable debt market.

However, an existing stick point remains, in that the NDRC does not require all money raised from green bond issuance to go towards sustainable assets.

Currently, 50 percent of proceeds can be be used for general working capital. The Climate Bonds Initiative, on the other hand, requires at least 95 percent of the funds raised from green bonds to be spent on green projects.

In addition, not all listed companies in China are required to disclose ESG risks, although the authorities are gradually raising requirements.

The new catalogue does also include renewable energy and carbon capture projects, projects that help replace coal with cleaner forms of energy, and projects that help steel mills pay for mandatory emissions control upgrades.

Shared bicycle services and infrastructure supporting new energy vehicles are also added to the new list.

The catalogue, available here, is open for consultation until 12 June.

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