|CDB has a robust green bond framework, which excludes coal and an elaborate vision for a green finance system.
CDB has guidelines on green finance guided by the principle of ‘beautiful China’ – a China that coexists with nature – and states that the Bank “spares no efforts to implement the strategy of building a green financial system and increase green finance supply”. Under this aim, CDB is targeting three areas: promoting ecological civilisation, green development of industries and the sustainable development of the Bank itself. At the international level, CDB aims to support and increase the extent of green practices and support sustainable economic, social and environmental development worldwide.
CDB’s vision for green finance includes four systems: (1) a system of institutional guarantee for green finance which includes a steering committee to coordinate CDB’s arrangements; (2) a system of green projects, with a focus on areas such as green industry, low-carbon and smart cities, environmental pollution treatment and ecological damage repair, green transport and green agriculture; (3) a system of green finance financial risk management, which incorporates environmental and social risk management into credit management, carries out environmental stress tests, and manages information disclosure in line with regulations and international practices; and (4) a system of green financial products, which includes the issuance of green bonds at national and international levels, and the development of credit products for energy conservation, green trade, energy efficiency and so on.
In terms of green bonds, in 2017 the Bank issued its first green bonds in euros and US dollars, to the value of CNY 11.1 billion. The proceeds for the issuance were mostly to be used in domestic projects, which is not surprising given CDB’s mandate. CDB was amongst the pioneers in excluding coal from its green bond framework in the country – and China announced that clean coal technology will also be excluded by China’s green bond guidelines.
CDB’s green bond framework states that the Bank “has green credit management rules which provide transparency on project due diligence, credit approval and post-lending review following the best practices of the Green Credit Guidelines by the China Insurance and Banking Regulatory Committee”. However, the lack of publicly available information undermines the ability for clients and researchers to understand the policies of CDB and how they are supporting green finance through their operations.
In 2019, CDB became a signatory, along with other major financial institutions, of the Green Investment Principles on the Belt and Road. Although the principles are not comprehensive, at the First Annual Plenary the various institutions agreed to collaborate to further develop the process of implementing the principles. This is an opportunity for CDB to learn from other financial institutions and international best practices, in particular with respect to avoiding financial risks from high-carbon or climate-vulnerable infrastructure.
CDB issued China’s first sustainable development-themed green bond under the Bond Connect program, with a volume of RMB10 billion. The bonds will finance green projects such as the forestry ecological construction project and national forest reserve project in Chongqing. By the end of 2019, CDB had issued a total of RMB 35 billion in themed green bonds, such as the “air pollution prevention bond”, the “bond for the coordinated development of Beijing-Tianjin Hebei Region”, the “green circular development bond”, the “bond for water resources protection in the Yangtze River Economic Area”, the “bond for clean transportation construction in the Guangdong-Hong Kong-Macao Greater Bay Area” and the “sustainable development bond”. All funds raised have been invested in key areas such as pollution prevention. It is estimated that the measurable environmental benefits will include but not be limited to:
- Reducing consumption of 370,000 tons of coal equivalent
- 810,000 tons of emitted CO2
- 64,900 tons of chemical oxygen demand
- 29,633tons of biological oxygen demand
- 33,933 tons of suspended matter
- 17,259 tons of total nitrogen
- 996 tons of total phosphorus per year
Recommendation: CDB stated that its information disclosure will follow international practices; therefore, the bank should follow TCFD recommendations on climate-related financial risks and lead by example in managing and avoiding those risks.
Recommendation: CDB and its partners should work to fully implement and strengthen the Green Investment Principles for the Belt and Road.