China, EIB collaboration seeks 'common language' for green finance

Chinese and European organisations have completed the first phase of joint research to come up with a common language for environmental investing.

The European Investment Bank (EIB) and the China Green Finance Committee (CGFC) have presented the initial conclusions of a project that ultimately seeks to facilitate the establishment of a common language in green finance, or “a standard-neutral taxonomy for the environmental use of proceeds”.

The organisations’ study looked in detail at the green bond standards in China and the EU, finding that they used different categories to classify underlying assets. They recommended further work be carried out on the compatibility between Chinese standards and those agreed by a partnership of multilateral development banks and the International Development Finance Club.

The CGFC/EIB initiative aims to provide a framework for initiatives that could create momentum for harmonising green finance standards. The organisations have said this could include proposals for a translation tool or “Rosetta Stone” using a universal system for classifying environmental activities for the purpose of comparing standards.

The backdrop to the initiative and the recent study is the rapid growth of the green bond market. More than $100bn (€85bn) of labelled green bonds has been sold on the primary market this year, according to analysis from the Climate Bonds Initiative (CBI). This is a new record.

“Something ‘good’ is going on in the bond markets”

Simon Bond, Columbia Threadneedle Investments

China is the top nation for green bond issuance this year to date, with China Development Bank, Bank of Beijing and ICBC the top issuers.

In the UK, NOW:Pensions has introduced green bonds to its diversified growth fund, saying this was part of its commitment to socially responsible investment.

The ATP-owned multi-employer pension provider holds green bonds denominated in sterling, US dollars, and Euros, with around 13% of total assets under management invested in the segment.

Win Robbins, trustee director at NOW:Pensions said: “The iinvestment team has thoroughly researched the green bond market to identify bond issues which satisfy the risk return characteristics that the portfolio is seeking.

“Encouraging and financing projects which focus on environmental and climate protection cannot be left solely to governments. The green bond market fulfils a vital role for society as a whole, while also benefitting members of the NOW:Pensions Scheme.”

Ørsted, the former DONG Energy, yesterday announced it planned to sell its first green bonds, a hybrid capital security and a senior bond, both issued in Euros.

Simon Bond, director of responsible investment portfolio management at Columbia Threadneedle Investments, said there has been a distinct social aspect to the latest surge in bond issuance.

“Something ‘good’ is going on in the bond markets,” he said yesterday. “While issuance is up 10% over this time last year, these last few days have been seminal in the development of the market for social and sustainable bonds – 17 bonds have been issued in Europe this week which I would regard as ‘socially beneficial’.”