Green finance, China-style


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$140 million green bond funding used to build… a petrochemical refinery.


October brought a curious twist on the sustainable financing theme, when a Chinese oil refiner raised Rmb1 billion ($140 million) of green bonds to fund the development of a petrochemical complex.

You read that right.

Chemicals firm Jiangsu Eastern Shenghong raised the bond, and it was something of a landmark: the largest single green corporate bond issued by a privately owned firm in China. The petrochemical refinery that will be built with this green funding will have a processing capacity of 16 million tonnes of crude oil a year.

This apparent contradiction stems from the fact that China’s rules on green financing allow the funds to be used if they pay for clean technology or otherwise improve efficiency and therefore reduce pollution relative to the amount of feedstock used.

This particular deal uses the energy efficiency argument.


It’s far from unusual. The Climate Bonds Initiative says that China issued $21.8 billion of green bonds in the first half of 2019, up 62% year on year, but that less than half of it would meet international standards on green financing.

According to Reuters, at least $1 billion of that funding went to coal-related projects, such as a Rmb3 billion green bond for Shanxi Luan Group in June. Shanxi Luan is a coal producer, and the proceeds of the bond were for coal generation.

There is talk of China bringing its standards into line with international norms, which would not have permitted either of these deals.

“From here on, every year in the 2020s must be a record year for green finance,” says Climate Bonds Initiative’s chief executive Sean Kidney.

It would be nice if the volumes were not funding coal plants.