Chinese domestic green securities

In December 2015, the PBOC published the Green Projects Catalogue for green financial bonds. The Catalogue, aimed at financial entities, defines eligible green projects and provides guidelines for project classification and eligibility criteria within the following six environmental sectors: 

• Energy saving
• Pollution prevention and control
• Resource conservation and recycling
• Clean transportation
• Clean energy
• Ecological protection and climate change adaption

In December 2015, the National Development and Reform Commission (NDRC), China’s national policy management agency, published its guidelines for green domestic corporate bonds. The Guidelines, aimed at non-listed companies, clarify what projects qualify as green. NDRC’s guidelines are limited to a list of eligible green projects that should be financed by green corporate bonds, and proposals for policy incentives for green bonds.

The NDRC Guidance lays out some requirements for allocation of proceeds during the bond term. For example, issuers can use up to 50% of the bond proceeds to repay bank loans and invest in working capital. However, it does not establish rules for management of proceeds and reporting. NDRC’s guidelines also define a list of 12 project categories eligible for green bond issuance, which are largely in line with the PBOC Green Bond Endorsed Project Catalogue. The exception is with nuclear energy, which is included by NDRC but not endorsed by PBOC.

Areas covered by the guidelines are:

• Technology improvement for energy saving and emission reduction
• Green urbanisation - energy saving
• Energy saving and environmental protection industry
• Pollution prevention and control
• Circular economy
• Water saving and unconventional water use
• Green urbanisation - transport
• Clean and efficient use of energy
• New energy - hydropower, wind, nuclear, solar, bioenergy, geothermal, shallow geothermal energy, marine, and air energy
• Ecological agriculture and forestry
• Ecological civilisation demonstration projects
• Low-carbon industry projects and demonstration projects

In March 2017, the China Securities Regulatory Commission (CSRC), the regulator overseeing the issuance of bonds from listed corporates and corporate asset-backed securities, released new guidelines for Chinese listed companies. The CSRC guidelines have adopted the green definitions used by PBOC, with a restrictive provision excluding high polluting and high-energy consumption companies that conflict with the national industrial planning policy. They also require the company to deliver a commitment letter to CSRC regarding the green characteristics of the issuance. The guidelines include a prohibition in principle on issuances of green bonds by non-green issuers.