China Green Bond Endorsed Project Catalogue (2015 Edition)

Preparation Instructions on Green Bond Endorsed Project Catalogue (2015 Edition)

Translated by International Capital Market Association(ICMA)

The Integrated Reform Plan for Promoting Ecological Progress issued by CPC Central Committee and the State Council on September 21, 2015, for the first time clearly stated to initiate the top-level design for the national green financial system, of which developing green bond market is an essential part. In the spirit of strategic planning of CPC Central Committee and the State Council, for the purpose of promoting green bond market, and of exploiting new, efficient and low-cost financing channels, Green Finance Committee of China Society of Finance and Banking (hereinafter referred to as “the Committee”) hereby put forward the Green Bond Endorsed Project Catalogue (2015 Edition) (hereinafter referred to as “the Catalogue”). The preparation instructions on the Catalogue are stated as follow.

I. Necessity of the Catalogue

The environmental challenges that China is facing greatly increase the necessity of transiting Chinese economy to a green and sustainable one.  Finance lays a foundation for resource allocation, and plays a significant role in the industrial restructuring and the transition to a green economy. However, the direct financing market in China is currently lacking of explicit defining criteria and catalogue for green investment projects, which goes against the purpose of encouraging investors from home and abroad to reinforce green investment and take social responsibilities.

Green bond, as an economical investment instrument with high mobility and low risk, can effectively enhance the financing availability for green projects, especially those with medium and long term, lower financing cost, and provide investors with a new channel to engage in green investment.  Defining criteria and category for green bond projects and establishing endorsed project catalogue is a fundamental work to push forward the sustainable development of the green bond market, and an essential reference for green bond issuance approval and registration, third party assurance, green bond rating and related environmental disclosure.

II. International Green Bond Principles/ Standards

When it comes to the defining criteria for green bond, the International Capital Market Association (ICMA) launched the Green Bond Principles (GBP), Climate Bonds Initiative (CBI) introduced Climate Bonds Initiative Taxonomy- Definitions, and Barclays and MSCI ESG Research have collaborated to develop Barclays MSCI Green Bond Index. In addition, providers of second party review or third party certifications, presented by CICERO, and financial institutions, presented by HSBC, also unveil related framework documents under GBP to set out more detailed classification and definition of green bond.

The definition and classification of the green bond is based primarily on the environmental performance of the green bond endorsed projects. The different focus on environmental performance by various institutions reflects the different focus on problems to be solved, which stems from the differences in stage of development and natural environments in different countries and regions.

III. Rationale and Principle of the Catalogue

In addition to challenges from climate change, China is facing other issues such as severe environmental pollution, aggravated resource constraints and deteriorated ecological degradation. As a consequence, the Catalogue must take multi-dimensional environmental benefits as the defining standard. Project definition should take special consideration of environmental benefits in GHG emission reduction, pollution reduction, resource conservation, ecological protection, and etc.. The Catalogue should prioritize projects with direct and marked environmental benefits, and those accord with national industrial policy.

Based on the considerations above, the Catalogue shall adhere to the following basic principles: i. Conforming to national conditions: focusing on improving the ecological environment and easing resource pressure, and following the lead of national industrial policy at the current stage. ii. Highlighting environmental benefits: supporting projects with marked environmental benefits and positive spillover effects. iii. Being simple and clear: taking into account the fact that most of the capital market practitioners are non-environmental professionals, and thus employing definition and classification method that is easy to follow and operate. iv. Making continuous adjustment: timely updating the Catalogue according to technological advancement, policy adjustment, standard updates and changes in resource and environmental conditions. v. In line with international practice: taking international standards and practices as reference to develop domestic definition and classification method, in order to facilitate international cooperation in green finance.

IV. Key Reference

1. Classification of Strategic Emerging Industry (2012) (Trial) (Guo Tong Zi [2012] 106; National Bureau of Statistics, January 4, 2013)

2. Proposal for Promoting the Application of Cleaner Production Technologies in Key Industrial Sectors for the Prevention and Control of Air Pollution (Gong Xin Bu Jie [2014] 273; Ministry of Industry and Information Technology, July 2, 2015)

3. Action Plan for Implementation of Key Energy Saving Technology and Equipment Industrialization (Fa Gai Huan Zi [2014] 2423; National Development and Reform Commission/ Ministry of Industry and Information Technology, October 2014)

4. National Key Energy-Efficient and Low-Carbon Technologies Promotion Catalogue (2014 Edition, Energy Saving Part) (NDRC Announcement No. 24 [2014]; National Development and Reform Commission, December 31, 2014)

5. Notice of National Energy Administration on Issuing the Action Plan of Clean and Efficient Coal Use (2015-2020) (Guo Neng Mei Tan [2015] 141; National Energy Administration, April 27, 2015)

6. Catalogue for Low-carbon Technology Promoted with Priority (NDRC Announcement No. 13 [2014]; National Development and Reform Commission, August 25, 2014)

7. Guidelines on Green Credit Loans (Yin Jian Hui [2012] 4; China Banking Regulatory Commission, February 24, 2012)

8. Energy Efficiency Credit Guidelines (Yin Jian Fa [2015] 2; China Banking Regulatory Commission and National Development and Reform Commission, January 13, 2015)

9. Notice of China Banking Regulatory Commission on Filing and Reporting the Green Credit Statistics Forms (Yin Jian Ban Fa [2013] 185; General Office of China Banking Regulatory Commission, July 4, 2013 )

10. Classification Standard for the Energy Saving and Environmental Protection Operation (2014 Edition) (China Energy Conservation and Environmental Protection Group, December 11, 2014)

11. Green Bond Principles (2015) (International Capital Market Association, March 27, 2015)