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Pedestrians are seen behind the logo of Bank of China on its ATM machine in Beijing, China, in this March 28, 2016 file photo. REUTERS/Kim Kyung-Hoon/File photo

Bank of China jumbo green bond shows growing Asian presence

By Umesh Desai (Reuters) | 7 July 2016

Bank of China‘s $3 billion multi-currency green bond underlines Asia’s rapidly growing share of global green funding as countries such as China and India, among the world’s biggest polluters, finance their environmental targets.

On Tuesday, the lender sold a three part deal in U.S. dollars, euros and yuan comprising 2-year, 3-year and 5-year bonds to raise $3.03 billion after drawing orders of about $7.8 billion across the tranches. At its height, Bank of China’s green bond – certified to show that funds raised will be used for environmental projects – had attracted orders of $8.5 billion.

The issue will fund eligible green projects in renewable energy, pollution prevention and control, clean transportation and sustainable water management, the offer document said.

“Urban rail is a potential asset base for financing in most emerging markets. These are electric and mass rapid transport so all are considered green. It is a good asset to have and Chinese banks have lots in their books,” said a banker not involved with the deal.

Data from Climate Bonds Initiative, a non-profit that aims to spur issuance of green bonds, showed that almost a third of the year-to-date global issuance of $38 billion green-labelled bonds originated from Asia. This compares with negligible issuance from the region in the past.

China needs at least 2 trillion yuan ($308.8 billion) of green investment annually over the next five years to promote environment protection and reduce the effects of pollution from its rapid industrial growth over the past three decades.

Issuance has also picked up from India, which is the world’s third-largest individual greenhouse gas emitter, behind China and the United States, according to the U.S. Environmental Protection Agency.

It is seeking investments of $100 billion over seven years to boost its solar energy capacity by 33 times to 100,000 megawatts.

In May, Axis Bank sold a $500 million 5-year bond. Last year, the Reserve Bank of India included lending to social infrastructure and small renewable energy projects as part of the priority sector lending requirement for banks, under which 40 percent of lending has to be allocated to socially important sectors.

(Reporting by Umesh Desai; Editing by Jacqueline Wong)

Topics

Climate and Energy, Corporate Governance

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