Asia follows China’s path to green bond growth
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Asia follows China’s path to green bond growth

Asian green bond initiatives are supporting an unprecedented global surge in issuance, with many markets taking a leaf out of China’s regulator-led book.




Rahul Sheth

Executive Director, Capital Solutions, Standard Chartered

Issued barely a month after the UN-sponsored Paris agreement on climate change was signed by 105 countries in November 2015, China’s plans to create a national framework for the issuance of green bonds looked ambitious to say the least.

The blueprint might have leveraged emerging global standards for investment in sustainable energy projects, but it also represented a significant commitment; China’s rules on eligibility for green bond status reflected the country’s environmental challenges and priorities. Importantly, the green bond initiative was part of a wider strategic plan for ‘greening China’s financial system’, overseen by the Green Finance Committee (GFC), a body set up by the People’s Bank of China, with responsibilities and jurisdiction across bonds, loans, insurance, and IPOs. Standard Chartered was one of two international banks providing input to the GFC on the formulation of the rules.

Barely 12 months since its launch, China’s ambitious plan had not only succeeded, but inspired many others, especially in Asia. At the 2016 UN Climate Change Conference held in Marrakesh last November, several countries announced similar plans on the back of China’s lead to link green bond initiatives to the delivery of national climate change plans. Moreover, Asia’s role in the green bond market is being transformed by the development of new frameworks and incentives by regulators and industry bodies.

In a global green bond market that more than doubled in size to over $85 billion[1] in 2016 (versus 2015’s levels), Asia’s collective market share grew to more than 40% of issuance (from 10% in 2015). China’s individual increase in market share (from about 7% to more than 35%) at a time of such accelerating overall market growth reflects the galvanizing impact of a ‘regulatory-push’ factor. In Europe and some other developed markets, growth has been led more by ‘investor-pull’ factors.


Such rapid expansion only comes from a broad-based shift: existing green issuers, largely developmental organisations, have been joined by an increasingly diverse range of entities, including developed-market corporates such as Apple, Toyota, Hyundai and Iberdrola, as well as issuers from emerging economies, primarily in Asia, including Bank of China, China’s Industrial Bank, Bank of Qingdao and Xinjiang Goldwind from China, and India’s Hero Future Energies and Axis Bank. Moreover, 2016 saw diversification of structure as well as issuer, with Bank of China launching China’s first green covered bond in November; India’s first green ‘masala’ bond was issued in August, by National Thermal Power Corporation (NTPC), just a month after the offshore rupee market had opened.

In many cases, this diversity in issuer and structure in Asia’s green bond markets is being fuelled by an adaptation of international standards to local circumstances. In India, for example, increased issuance has been prompted by government-mandated renewable energy targets and adoption of the International Capital Market Association’s (ICMA) voluntary Green Bond Principles. Government activity in the renewables energy space has been backed up by the efforts of the Indian Green Bonds Market Development Council to provide recommendations and guidance for both issuers and regulators. Taiwan is widely expected to follow India and China in formulating national regulations around green bonds, eventually also covering Formosa green bond guidelines. Taiwan is expected to endorse the ICMA’s Green Bond Principles, albeit with issuers potentially requiring specific regulatory clearances for their green investment plans.

Meanwhile, the ASEAN region has also taken several steps forward, having initially been slower out of the blocks in seizing opportunities to tap green investment for renewable energy and forest conservation projects, for example. With regulators increasingly recognising the key role green finance can play in the region’s sustainable economic development, the ASEAN Capital Markets Forum is looking to promote ASEAN green bonds as an asset class to global investors, by adopting the ICMA’s Green Bond Principles and exploring pan-ASEAN issuance guidelines for green bonds. Singapore may take a leading role in fulfilling ASEAN’s green bond ambitions following the Monetary Authority of Singapore’s launch of a green bond grant scheme to cover green bond issuers’ expenses from third-party verification up to S$100,000. This makes green bond issuance costs comparable to conventional issuance and is available to repeat issuers globally, so long as the scheme’s requirements are met.

Strong start

Could global green issuance top $100 billion in 2017? France’s €7 billion sovereign bond contributed to a strong start to the year, supported by issuance from a variety of regions and issuer types, with Asia witnessing activity from SSAs (supranational/sovereign/agencies), corporates, financials and municipals.

Chinese green bond issuance has started 2017 in much the same vein as 2016, with renminbi-denominated issuances from Longfor Properties (a CNY3 billion dual tranche green bond that will fund green building projects), China Development Bank and Huarong Financial Leasing. A further sign of a broad-based and maturing issuance pipeline was the first green bond issuance by a Chinese local government financing vehicle, proceeds of which will be used by the Fengxi New City Construction and Development of Xi’an to build electric vehicle charging stations and to develop ‘hot-dry-rock’ geothermal power for residential heat supply. China is expected to continue to play a leading role, not least due to the size of the challenge facing the country in order to achieve its stated aim of transforming the provision of energy used in its economy from carbon-based to renewable fuel sources.

Meanwhile, India also contributed to the encouraging start to the year through issues from IREDA and ReNew Power, the latter of which issued a $450 million bond to refinance debt for 13 existing green projects.

Slightly further afield on the Pacific Rim, Australia bolstered the region’s multi-faceted presence in the green bond market. Flexigroup floated its second certified green solar asset-backed securitisation, while financials Westpac, CBA and NAB have also been also active, along with state-level issuance from the treasuries of Victoria and Queensland. Indeed, Australia is proving a perfect example of an active green bond market across the corporate, financial and sovereign sectors.

Total March issuance of more than $8 billion lifted Q1 2017 global green volumes to just over $30 billion (nearly 75% of 2015's volumes). With diverse regulatory and industry initiatives expected to boost existing momentum, notably in Asia, the green bond market looks well set to scale new heights in 2017.

[1]   Green Bonds also include social bonds and sustainability bonds (bonds which combine green and social aspects)


Euromoney and Standard Chartered will be running a series of webinars on debt capital markets. The first one will be on 'Investing China: CGB futures and the Bond Connect’ on May 15. Find out more



Based in Singapore, Rahul Sheth is an Executive Director in Standard Chartered’s Capital Solutions team, housed within its Capital Markets franchise. 

In his role as a solutions specialist, he globally heads the green bonds product and has been responsible for leading pioneering and award-winning green bond transactions for clients across the bank’s footprint including the New Development Bank, Axis Bank, Turkiye Sinai Kalkinma Bankasi (TSKB), Agricultural Bank of China, National Thermal Power Corporation (NTPC), Industrial Development Bank of India (IDBI), Bank of China and CLP Wind Farms among others. 

He maintains an active dialogue with regulators and organisations such as the Climate Bonds Initiative and the Green Bond Principles. Standard Chartered was among two international banks on the People’s Bank of China-led ‘Green Finance Committee’, responsible for setting the green bond regulations for Chinese issuers.   

Rahul also spearheads hybrid capital structuring business for banks, insurance companies and corporate clients.  He has structured pioneering hybrid transactions for emerging market clients spanning the footprint from LatAm to Asia. As part of his mandate, he maintains a very close link with issuers, regulators, rating agencies and credit investors within the hybrid universe. 

Prior to joining Standard Chartered in 2010, Rahul worked with Bank of America Merrill Lynch in the Fixed Income Structured Solutions team in Australia and before that, with Citibank

Rahul holds a master’s degree in business administration from the Indian Institute of Management, Ahmedabad and is a Chartered Accountant from the Institute of Chartered Accountants of India. 



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