Central electricity enterprises recently have released several carbon neutrality related green bonds, as reported by Caixin on March 6. Up to now, there are seven such bonds issued in the Shanghai Stock Exchange (SSE) with a total fundraising scale of RMB13bn. Among them, five central enterprises accounted for nearly 77%, standing at RMB10bn, including China Energy Investment Corporation (China Energy), State Power Investment Corporation (SPIC), Huaneng Group, China Huadian Corporation, and China Three Gorges Corporation (CTG).

Prior to the SSE, the interbank market released six carbon neutrality bonds on February 7, marking China’s first batch of carbon neutrality bonds. The combined issuing scale of the six bonds were RMB6.4bn. Specifically, five central enterprises, involving China Southern Power Grid, CTG, SPIC, Huaneng, and State Development & Investment Corporation’s (SDIC) controlled subsidiary, issued RMB5.9bn worth of the bonds, with the coupon rates between 3.4% and 3.65%.

Carbon neutrality bonds are a sub-variety of green bonds, which raise funds for green projects certified to have carbon emission reduction benefits under the current green bond policy framework, such as clean energy, clean transportation, and green buildings. The transparency requirements of carbon neutrality bonds’ information disclosures are higher than that of ordinary bonds. Issuers need to hire a third-party professional institution to issue an assessment and certification report to quantitatively measure the benefits of carbon emission reduction. During the existence period, they also need to continuously disclose the use of raised funds, the progress of green projects, and actual carbon emission reduction data. Although the coupon rates of those carbon neutrality bonds are around 3.5%, implying lower investment returns and lees attraction for investors, this also means lower fundraising costs for issuers. Thus, enterprises would have incentives to release more carbon neutrality bonds and promote the development of green projects.

Sources:

https://www.caixin.com/2021-03-06/101671769.html