Editor's note: In a long-ranging interview with China Daily website, Jurgen Conrad, head of economics unit at the Asian Development Bank in China, discusses the opportunities and challenges created by the fast-paced growth of green bonds. He also recommends China to take the leading role to formulate an international standard for green bond at the G20 summit in Hangzhou city, China, this year.
Massive investment has made a phenomenon:
The green finance in China has become quite appealing for both domestic and international investors recently. At the Green Finance symposium in Washington, Zhou Xiaochuan, governor of the People's Bank of China (PBOC), said: "According to our estimates, China will need to invest about $600 billion per year in the coming five years in green sectors. This means that we need to double our annual green investment over the current level." He also emphasized that green finance will be a special topic at September's G20 meeting in Hangzhou.
Last year, the PBOC established a green bond market and published a guideline to regulate the market. Mark Schwartz, Vice-Chairman of Goldman Sachs Group, said China was the first country to publish national guidelines on the issuance of green bonds.
One of the major reasons behind the green finance push is the government's determination to tackle environmental problems. Green bonds can help the country show its seriousness about the issue.
For instance, for the first time in the CPC's history, green finance was written into the 13th Five-Year Plan in November.
Current standard:
To develop a mature comprehensive green bond market, there is a long way to go; though the volume has been impressive (China issued $7,900 million worth of green bonds in the first quarter of 2016, nearly half of all green bonds issued globally, putting the country as number one regional issuer for the first time, according to Moody's report.).
The question comes up first is whether there is a universal international definition or standard, especially when the process is still evolving. The most well-recognized one is Green Bond Principle announced by International Capital Market Association (ICMA). For the domestic market, the Preparation Instruction on Green Bond Endorsed Project Catalogue published by the Green Finance Committee of China Society of Financing and Banking could be used as a concrete and practical codes for companies and institutions to refer.
Whether international or domestic, three common grounds need to be covered, said Jurgen: Whole project cycle needs to be assessed based on criteria. Reports should be transparent and filed regularly. Quality of management and internal control systems should be maintained.
