SSE Introduces Carbon-Neutral Green Bond, Serving National Strategies and Promoting Green Development

02 Mar 2021

On February 24, the Securities Times found from an announcement on the Shanghai Stock Exchange website that China Energy Investment Corporation became the first issuer of carbon-neutral green bond to disclose the issuance announcement on the exchange market. On the same day, the State Power Investment Corporation Ltd., China Huaneng Group Co., Ltd., and China National Nuclear Corporation also disclosed issuance announcements respectively, making them the first batch of carbon-neutral green bond issuers on the exchange market. It is reported that China Three Gorges Corporation, China Huadian Corporation Ltd., Beijing Infrastructure Investment Co., Ltd., and Huaneng Tiancheng Financial Leasing Co., Ltd. will also issue carbon-neutral green bonds on the Shanghai Stock Exchange in the near future.

Carbon-Neutral Green Bond: Anchored in Low-Carbon Circular Development

The Central Economic Work Conference and the "14th Five-Year Plan" proposal respectively pointed out that it is necessary to achieve carbon dioxide emissions peak and carbon neutrality, and to reduce the intensity of carbon emissions. At the same time, the State Council released guidelines, calling for accelerating the development of a green and low-carbon circular economic development system and promoting a comprehensive green transformation of economic and social development.

Carbon neutrality means "reducing net carbon dioxide emissions to zero". To achieve carbon neutrality, there are generally two methods: one is to remove greenhouse gases through special methods, and the other is to use renewable energy to reduce carbon emissions.

The "carbon-neutral green bond" launched by the Shanghai Stock Exchange is a category of green bonds. The funds raised will be mainly used for the construction, operation, and acquisition of certified green industry projects with carbon emission reduction benefits, or for the payment of loans for carbon-neutral projects, which reduce carbon emissions and continue to promote green development through energy conservation, emission reduction, and full use of renewable energy.

Both the issuers and the projects involved in the carbon-neutral green bonds issued this time are noteworthy. Among them, the China Energy Investment Corporation proposes to issue bonds worth 5 billion yuan, which is the largest among this batch of issuers. The issuer has 12 years of carbon asset management experience and has played a leading role in the establishment of China's carbon market. This time it plans to use no less than 70% of the raised funds on green projects with carbon emission reduction benefits to help build a clean, low-carbon, safe and efficient energy system. The funds raised by the State Power Investment Corporation will be invested in the Shandong Haiyang Nuclear Power Project. According to estimates, the project can reduce carbon dioxide emissions by more than 13 million tons per year compared with the same amount of thermal power on the grid. Huaneng Group is China's first central SOE in the electric power industry to establish a special "carbon neutrality" research institute, and it is at the forefront of forward-looking research on carbon. China National Nuclear Corporation's bond will raise funds for the Liaoning Xudabu Nuclear Power Plant project, which is of great significance to promoting the revitalization of the old industrial base in Northeast China and to ensuring the safe power supply of the regional power grids in Northeast China and North China.

SSE Bond Market: Continue to Deepen Green Bond Innovation

The relevant person in charge at the Shanghai Stock Exchange said that implementing the new development philosophy and fostering the new development paradigm is a major task for the Shanghai Stock Exchange's bond market. Over the years, the Shanghai Stock Exchange has always been committed to serving the national strategy and promoting innovation in green finance.

It is reported that the Shanghai Stock Exchange has been promoting the development of the green bond market since 2016, launching special innovative varieties of green bonds, and opening up a green channel for the review and listing of green bonds. The Shanghai Stock Exchange implements a system of "review by designated staff right after receiving the application" to effectively improve the efficiency of green bond financing. On the basis of the previous pilot issuance program, the Shanghai Stock Exchange successively published notices of the pilot program, regulatory Q&A, and guidelines on the application of rules, in order to regulate the use of funds raised through green bonds, information disclosure, and evaluation and certification. As of the end of 2020, a total of 186 green corporate bonds and 256 green asset-backed securities in 49 installments have been issued on the Shanghai Stock Exchange, raising 247 billion yuan in total. The funds raised are mainly used for green industries such as clean energy, energy conservation and environmental protection, pollution prevention and treatment, and ecological protection, which meets the diversified green investment and financing needs of enterprises, and promotes China's green economy.

The carbon-neutral green bonds launched this time will more precisely support green and low-carbon development. Judging from the issuance announcements disclosed by the four issuers, each has disclosed in detail the use of raised funds, and the proposed investment projects will mainly focus on clean energy industries including nuclear power, hydropower, and wind power to help reduce carbon emissions. At the same time, various agencies have clarified relevant information disclosure arrangements. During the duration of carbon-neutral green bonds, the issuers will regularly disclose carbon emission reduction benefits.

At the same time, the Securities Times found that the Shanghai Stock Exchange also attaches great importance to investor recognition of and support for green bonds, and has made various institutional arrangements. The listing abbreviations of all green bonds on the Shanghai Stock Exchange begin with G (for Green), and the green bonds are displayed on a special page on the SSE Bond Information website, making it convenient for investors to identify and track them. In addition, the Shanghai Stock Exchange and the China Securities Index Co., Ltd. jointly published the SSE Green Corporate Bond Index and the SSE Green Bond Index. The Shanghai Stock Exchange and the Luxembourg Stock Exchange officially launched the "Green Bond Channel" in 2018 to display each other's market data simultaneously, and started the eastbound display of green bonds in 2019. It is reported that the Shanghai Stock Exchange is also an observer of the international "Green Bond Principles" and has joined the United Nations Sustainable Stock Exchanges initiative, actively participating in the deliberation and formulation of relevant rules.

The relevant person in charge at the Shanghai Stock Exchange said that in the future, they will actively support eligible companies to issue carbon-neutral green bonds, vigorously develop green direct financing, and focus on building a green financial mechanism to help promote a comprehensive green transformation of the economy and society. (By ZHU Kai)

This article was originally published on the Securities Times in Chinese, and is translated here by the SSE.