Chinese Exchanges to Adopt New Green Bond Rules

The China Securities Regulatory Commission (CSRC) has instructed the Shanghai and Shenzhen exchanges to revise their rules to bring issuances of green bonds in line with the newly published China Green Bond Principles, Reuters has reported. The Principles were published last month to address differences in how various Chinese regulators define green bonds. In the interbank bond market, green bond issuers use 100% of proceeds on green projects, however exchange-traded corporate bonds only have a 70% threshold, while state-owned enterprise bonds have a 50% threshold. The new rules  are largely in line with principles issued by the International Capital Market Association, and make clear that green bonds must use 100% of proceeds on green projects. Although a record US$109.5 billion of Chinese green bonds were issued in 2021, making China the fastest-growing major market for such bonds, nearly 40% of the issuance was not aligned with global definitions. The changes are expected to result in more green bonds in China internationally recognised, potentially enabling China to overtake the US as the world’s largest green bond market. China had issued roughly US$200 billion of green bonds by the end of 2021, compared with slightly over US$300 billion by the US.

 

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