193 Chinese Outstanding Green Bonds Relabeled Against Common Ground Taxonomy

2023-07-15　 　

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To further promote the opening of China’s green bond market, and enhance the role of the Common Ground Taxonomy (CGT) in facilitating cross-border flows of green capital, the Green Finance Committee (GFC) of China Society for Finance and Banking has coordinated the relabelling of select outstanding green bonds traded on China interbank market against the CGT. On July 14 2023, the expert group convened by the GFC released a list of 193 Chinese outstanding green bonds (July 2023 version) deemed aligned with the CGT. The GFC expert group commented that the relabelling work will remain a dynamic endeavour, and the list may expand as methodologies are refined and coverage widened.

The CGT, which encompasses 72 economic activities that have significant contributions to climate change mitigation and are recognized by both Chinese and the EU taxonomies, was developed by the International Platform for Sustainable Finance (IPSF) Taxonomy Working Group, co-chaired by China and the EU.  The People’s Bank of China has encouraged market participants to actively utilize the CGT in developing and labelling green financial instruments, with a view to enhancing the openness of China‘s green finance market. In this context, the GFC has undertaken the relabelling work for existing green bonds against the CGT.

According to the GFC expert group, which consists of specialists from China Foreign Exchange Trade System (CFETS) and five green bond verifiers, the eligibility criteria for identifying the 193 CGT aligned Chinese green bonds includes:

•Green bonds traded on China’s interbank market;
•Maturity date later than March 31, 2023; and
•Use of proceeds and/or underlying assets are 100% compliant with the CGT.

The first batch of 193 CGT-aligned green bonds has now been published on GFC’s website and other media platforms. The GFC welcomes relevant institutions to engage in product innovation, including green bond indices and green bond funds, based on these results. CFETS is authorized to publish the bond list and is responsible for maintenance and updating of the list for the future.

Dr Ma Jun, Chairman of GFC and Co-Chair of the IPSF Taxonomy Working Group said, “The CGT represents an important collaborative effort to echo the international call and G20 recommendation to enhance comparability and interoperability of sustainable finance alignment approaches such as taxonomies across jurisdictions. It can help improve international connectivity between bond markets and facilitates cross-border green financing.

“The GFC expert group’s effort is an important innovation to expand the use cases of the CGT. This initiative will also help enhance the openness of China’s green bond market to global investors.”

Sean Kidney, CEO of the Climate Bonds Initiative (CBI) said that “as one of the largest green bond markets, China’s initiative to relabel existing green bonds using the CGT is a great innovation. It will support increased cross-border flows of green capital and encourage more countries and regions to join the CGT.”

Huang Chaoni, Vice President and Secretary-General of the Hong Kong Green Finance Association said that “international investors are very keen to see broader applications of the CGT and welcome the work done by the GFC. This exercise has the potential to attract more investment from overseas to the onshore green bond market and serve as an example for other markets.”

Since its release in June 2022, the CGT has gained significant attention both domestically and internationally, and has been referenced by many other jurisdictions in developing their own green finance taxonomies. Many Chinese issuers have issued green finance products in the international market using the CGT as a labelling tool.  

Recently, the IPSF taxonomy working group has announced its phase II workplan, encompassing the broadening of the CGT’s jurisdictional reach, and the expansion of its activity coverage. The IPSF is actively devising plans to increase its capacity-building efforts in tandem with these developments.

The China GFC expert group will continue the refinement of the relabelling methodology and expand the scope of green bonds for consideration, based on market dynamics and the ongoing development of the CGT.

Appendix 1: List of Chinese Green Bonds (July 2023 version) Relabelled with CGT

A total of 193 outstanding green bonds traded on China’s interbank bond market have been identified as CGT aligned through this relabelling exercise. These green bonds supported projects in areas such as renewable energy, energy storage and batteries, green transportation, and green manufacturing. Each of these bonds satisfies all the technical requirements specified in Appendix 2 of this announcement. The outstanding green bonds identified in this exercise covers the overlap scenarios 1, 2, 3, and 4 as outlined in the CGT methodology.

Click here for the list of CGT aligned Chinese green bonds (July 2023 version)

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Appendix 2:  Organizational Issues and Methodology of the CGT Relabelling Exercise

1. Organization of the relabelling exercise  

The relabelling exercise was performed by an expert group convened by the Green Finance Committee of China Society for Finance and Banking (GFC).  The expert group is co-chaired by China Foreign Exchange Trade System (CFETS) and China Lianhe Equator Environmental Impact Assessment Company.

Lianhe Equator conducted the initial screening of green bonds within the defined scope of exercise to evaluate their eligibility of Chinese green bonds against the "Common Ground Taxonomy" (CGT). Four other verifiers conducted the second-round evaluation. Specialists from the Institute of Finance and Sustainability and the National School of Development of Peking University also provided inputs and support as members of the expert group.

The GFC Expert Group consists of specialists from the following organizations (in alphabetical order):

•Ernst & Young Hua Ming LLP
•National School of Development, Peking University
•Institute of Finance and Sustainability
•Morningstar (Shanghai) Ltd.
•China Lianhe Equator Environmental Impact Assessment Co., Ltd.
•China Chengxin Green Finance Technology (Beijing) Ltd.
•China Foreign Exchange Trade System
•CECEP Hundred Technical Service (Beijing)

2. Eligibility criteria used by this relabelling exercise  

Green bonds eligible for this relabelling exercise include non-financial corporate green bonds and green financial bonds issued on China’s interbank market, with a maturity date extending beyond March 31, 2023. The specific instruments comprise, among others, green medium-term notes, green short-term and green super short-term commercial papers, green asset-backed notes, green corporate bonds, green financial bonds, and green asset-backed securities.

This relabelling exercise uses publicly disclosed bond documents as the main source of information, including, but not limited to, prospectuses, third-party verification reports, and ESG or sustainability reports. If a bond has made public announcements regarding a change in the use of proceeds, the provision of latest information prevails and the actual usage of proceeds is used for evaluation.  

For non-financial corporate green bonds, 100% of these bonds’ use of proceeds should be directed to activities aligned with the CGT. Information should be publicly available to demonstrate that the underlying projects or assets that received the proceeds meet all relevant Substantial Contribution Criteria in CGT. Bonds with insufficient public information for assessing their compliance with Substantial Contribution Criteria are not included in this relabelling exercise.

For green financial bonds, this labelling exercise is applicable only to those that have already undergone assessment and labelling as CGT-aligned by verifiers, as stated in the bonds’ third-party verification reports.

3. Publication of results

The GFC releases the labelling results (see attached tables in Appendix 1) on the websites of GFC and CFETS and via other media platforms. CFETS will be responsible for maintaining and updating related information.  The published information includes the security codes, insurer names, scenarios employed under the CGT, and the names of the first and second verifiers for the 193 CGT aligned green bonds.  

Source: Green Finance Committee of China Society for Finance and Banking