Outstanding green finance research in China 2019
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Outstanding green finance research in China 2019

Industrial Bank's research on China's green bond market

There are many reasons why Industrial Bank beats the big state-owned banks to become the largest bank issuer of green bonds in China, but one contributing factor is its outstanding research capability.

Last year, the bank’s research team, known as Industrial Economic Research and Consulting, produced a series of reports on the domestic green bond market that are of immense value to the market’s participants and regulators alike. The research was clearly structured and succinctly presented in four documents. In the main report in the series, Industrial Bank’s green finance researchers surveyed the overall domestic green bond market to highlight new opportunities and challenges emerging on the market.

After briefly summarizing the new opportunities, such as fresh policy incentives for market participants and a policy arrangement to allow investors in mainland China to invest in Hong Kong’s bond market and vice versa, the report pinpoints the challenges facing the domestic green bond market, such as hidden costs in green bond issuance, incongruity between domestic and international standards and the lack of a large community of responsible investors.

What is even more valuable here is that the report offers specific proposals to address each of the main challenges. For example, it proposes that regional governments in China roll out more subsidies or offer tax incentives to lower overall costs for green bond issuers. It also urges financial regulators to encourage domestic banks, securities firms, insurance companies and fund management companies to sign up for the United Nation’s Principles for Responsible Investment (UN PRI) to cultivate more responsible institutional investors.

The main report was published in China Banking Industry, a highly influential monthly magazine sponsored by the China Banking and Insurance Regulatory Commission. In the other three reports which Industrial Bank published for its clients, the research team analyzed three segments of the domestic green bond market – the market for bonds issued by financial institutions, the market for asset-backed securities and the corporate bond market – to help clients navigate changing market conditions.

The research reports were co-authored by Qian Lihua, senior green finance researcher at Industrial Bank’s research unit, Lu Zhengwei, Industrial Bank’s chief economist, and Fang Qi, green finance researcher at Industrial Bank’s research unit.

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