New bond index to boost China's green finance launched

A new environmental, social and governance (ESG) bond index that will further support the development of green finance in China was launched at the Luxembourg Stock Exchange on Thursday.

The CCB-Wind Green ESG Bond Index, China's first green bond index in the primary market that combines the concepts of carbon neutrality and ESG, will be made accessible to international investors through the exchange.

"Following China's recent efforts to open up its financial markets, international investors are increasingly focusing on China. In parallel, China has established ambitious policies to green its financial system and support sustainable development and the transition towards a low-carbon and more inclusive economy," said Julie Becker, CEO of the Luxembourg Stock Exchange.

"The development of China's bond market — coupled with the growth of green finance in China — brings benefits and opportunities far beyond China's borders. Professional and private investors alike are therefore looking for information and data to inform their investment decisions and support both their diversification strategies and their sustainability mandates," she said.

The new index is jointly developed by China Construction Bank Corp, Wind Information Technology Co, and the International Institute of Green Finance at the Central University of Finance and Economics. It selects new AAA-rated debentures supporting green growth and carbon neutrality, which meet ESG rating standards and are issued every week at the China Interbank Bond Market, Shanghai Stock Exchange and Shenzhen Stock Exchange, to show changes in issuing prices of China's green and ESG bonds. The higher the index, the higher the financing cost for bond issuers.

"Taking reference from domestic and international standards for green and ESG bonds, the index will provide international institutional investors with a more intuitive and more accurate instrument that is quantifiable and comparable. In this way, it will deepen international investors' understanding of China's high-quality corporate green bond issuers, guide more proactive allocation of global funds to the country's green assets, and accelerate international cooperation of green capital markets," said Wang Hao, executive vice-president of China Construction Bank.

The index will fill the gaps in reference pricing of green bonds in the primary market, improve the price discovery mechanism for green bonds, and track the long-term value of green investments, Wang said.

China has developed a robust green bond market in recent years. By the end of 2020, the volume of labeled green bonds issued in the country exceeded 1 trillion yuan ($155.3 billion), while the volume of unlabeled green bonds hit 10.32 trillion yuan, among which the money invested in green projects reached 6.12 trillion yuan, according to the International Institute of Green Finance at the Central University of Finance and Economics.