State-owned financial institution China Central Depository & Clearing Corporation (CCDC) recently held a conference, where its research and development (R&D) center proposed the concept of substantive green bonds and promote such bonds in the Guangdong-Hong Kong-Macao Greater Bay Area (GBA), as reported by JRJ.com on February 18. At the same time, China Bond Pricing Center, a subsidiary of CCDC, released GBA green bond indexes.

Labeled green bonds are the focus in the domestic green bond market, referring to green bonds that have been approved by regulatory agencies, of which the raised funds are mainly used to address assets or projects about climate change. In the meantime, there are also many bonds that invest into green projects but are not certified as green bonds, which are the so-called substantive green bonds, worth around three times that of label bonds at present. Compared with labeled green bonds, substantive green bonds have compatible issuance standards with international green bond issuance policies, while not requiring pre-issuance and third-party certifications, implying lower costs. Thus, substantive green bonds could be a useful supplement to labeled green bonds. However, substantive green bonds also face problems such as imperfect information disclosures of issuers, and the key environmental information obtained from public disclosures can only account for 60%. In addition, issuing substantive green bonds cannot receive political rewards like labeled bonds.

CCDC stated that the company has been conducting the identification of substantive green bonds in the GBA for four years. As of the end of 2020, CCDC had identified 2,017 substantive green bonds with a total value of RMB5.3tr, including RMB1.4tr of labeled green bonds. From the regional point of view, Guangzhou is the city with the largest issuance scale of substantive green bonds in the GBA, worth RMB140.34bn by the year-end 2020. Currently, CCDC is actively promoting the construction of a substantive green bond database to improve the integrity of environmental benefit information disclosure.

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