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.”
Chaoni Huang, 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.