By Flora McFarlane.
The People’s Bank of China (PBoC) and China Securities Regulatory Commission (CSRC) has released guidance on the development of the green bond market certification system, aimed at streamlining, regulating and promoting the growing market.
The green bond market in China has been under development for several years, with the PBoC overseeing implementation of state-directed green finance since 2015. The latest Communist Party Congress saw general secretary Xi Jinping affirm China’s commitment to green finance; part of a wider focus on sustainable development. As of October 2017, total green bond issuance was just shy of RMB 400 billion.
Identifying problems with the regulatory and transparency processes in certification and issuance, the PBoC and CSRC have developed guidelines that address regulation of certifying institutions and establishing quality control systems both through self-administered and external procedures.
Green bond certification is divided into two sections: pre-issuance and duration certification. Pre-issuance certification focusses on the compliance of issuers to the principles of green bonds, setting out the legal and regulatory requirements for green bond issuances.
Financial backing disclosure, reporting mechanisms, and environmental benefits targets will also come under pre-issuance certification, which the PBoC hopes will contribute to the “honest, trust-worthy, objective, fair, diligent, and responsible” principles of green bond issuances.
Duration certification, is aimed at ensuring the “effective implementation” of pre-issuance regulation, including market disclosure compliance and monitoring the attainment of environmental targets.
The guidelines also set out approaches in which certification institutions are able to source and verify green projects. Interviews, on-site investigation, and environmental benefits verification are among the methodologies promoted by the new guidelines.
These approaches, the PBoC and CSRC have said are intended to minimise the issuance of unsatisfactory green bonds, allowing for regular quality assurance in the issuance process.