latest-news-headlines Market Intelligence /marketintelligence/en/news-insights/latest-news-headlines/investors-applaud-china-s-plan-to-ban-clean-coal-from-green-bond-financing-60257794 content
Log in to other products

Login to Market Intelligence Platform

 /


Looking for more?

Contact Us

Request a Demo

You're one step closer to unlocking our suite of comprehensive and robust tools.

Fill out the form so we can connect you to the right person.

If your company has a current subscription with S&P Global Market Intelligence, you can register as a new user for access to the platform(s) covered by your license at Market Intelligence platform or S&P Capital IQ.

  • First Name*
  • Last Name*
  • Business Email *
  • Phone *
  • Company Name *
  • City *
  • We generated a verification code for you

  • Enter verification Code here*

* Required

Thank you for your interest in S&P Global Market Intelligence! We noticed you've identified yourself as a student. Through existing partnerships with academic institutions around the globe, it's likely you already have access to our resources. Please contact your professors, library, or administrative staff to receive your student login.

At this time we are unable to offer free trials or product demonstrations directly to students. If you discover that our solutions are not available to you, we encourage you to advocate at your university for a best-in-class learning experience that will help you long after you've completed your degree. We apologize for any inconvenience this may cause.

In This List

Investors applaud China's plan to ban clean coal from green bond financing

Street Talk Episode 68 - As many investors zig away from bank stocks, 2 vets in the space zag toward them

Street Talk Episode 66 - Community banks tap the debt markets while the getting is good

Street Talk Episode 67 - Veteran investor tabs Mick Mulvaney to help with latest financial stock-focused fund

Street Talk Episode 65 - Deferral practices trap US bank portfolios in purgatory


Investors applaud China's plan to ban clean coal from green bond financing

China's proposal to stop recognizing clean coal as projects qualified for green bonds could attract more interest from foreign investors, as the policy change brings domestic standards closer to the more stringent international definition of green projects.

"Clean utilization of fossil fuel," which ranges from coal washing to carbon capture, is excluded from the list of projects eligible for green bond financing, according to a proposal released by the People's Bank of China in May. It did not say when the policy will be implemented. Clean coal projects have always been excluded in green bonds that are certified by international standards.

The gap between the standards acceptable in China and elsewhere has been one of the reasons why some international institutional investors have been staying away from green debt issued by Chinese issuers, as well as the faster growth of locally compliant green bonds targeting mostly onshore investors in China, analysts say.

SNL Image

China's intention for clean coal exclusion makes it "very attractive to international investors," Maitri Asset Management Chief Investment Officer Ankit Khandelwal said via email. "As responsible investors, we welcome this alignment as it is more relevant to our investment strategy.

"Clean utilization of coal being eligible for Chinese green bond projects has traditionally been an area of contention for global green bond investors."

Trend may reverse

In the first half, China's issuance of green bonds that only met domestic definitions totaled US$7.97 billion, well above $4.37 billion for the globally aligned bonds, according to the Climate Bonds Initiative, or CBI. Overall, green bond issuance has slowed so far in 2020 amid the pandemic.

For the second quarter through June alone, green bonds issued on the Chinese standards more than doubled to $5.92 billion from the previous quarter, while the globally aligned green bonds also nearly doubled to $2.82 billion, CBI added.

SNL Image

In 2019, locally aligned green debt in China totaled US$24.5 billion, less than US$31.3 billion for the bonds aligned with the global standards, according to the CBI.

China's proposal could encourage more issuance of globally aligned green bonds, said Shuang Liu, senior associate at Sustainable Finance Center of World Resources Institute. "It'll also send a policy signal for Chinese stakeholders to mainstream climate considerations," Liu said.

China's decision about clean coal exclusion "is a message that China will become more environmental-conscious and investors are taking this in a positive manner," said Tamami Ota, senior researcher at Daiwa Institute of Research. "Some investors could divest coal [in their portfolios], instead of investing in other green projects."

Still falling short

Despite the change, Chinese standards still fall short of international standards. For example, green bonds aligned only to local rules allow Chinese issuers to use up to 50% of proceeds to repay bank loans or for general working capital, while international standards allow no more than 5% of proceeds for that.

On the definition of projects, the international guidelines pay more attention to climate change mitigation and adaptation, while China's domestic rules emphasize environmental benefits such as pollution reduction, resource conservation and ecological protection in addition to the reduction of greenhouse gas emissions, according to a 2019 CBI report.

Clean transport and clean energy are the two biggest uses of proceeds from China's domestically aligned green bonds, representing 26% and 27%, respectively, of the nation's total issuance of locally aligned green bonds in 2019, according to the report. They were followed by pollution prevention and control and general working capital.