The Webinar on Innovative Green Financial Instruments was hosted by Bank of China, with the support from Standard Chartered, AIIB, EBRD, Credit Agricole CIB and Lianhe Equator, on July 16. The webinar centered on how different types of market players (public and private financial institutions, as well as third-party verifiers) have played a role in facilitating the innovation of green financial products.

The past years have seen the great momentum of green and sustainability bond issuance around the world. Financial institutions like the Bank of China and Standard Chartered have been active players in this field, keeping a high level of issuance annually while innovating bonds that serve very specific climate and environmental purposes, such as green transition.

With the globalization of RMB, the opening up of the Chinese capital markets, and the rapid evolvement of the BRI, panda bonds may provide new opportunities for global institutions looking to invest in green projects in the BRI region, as panda bonds help to diversify financing channels for bond issuers and manage financing costs for those with a need of cash and assets denominated in RMB.

Domenico NARDELLI, Treasurer of the Asian Infrastructure Investment Bank, commented that there are two dynamics behind the growth of panda bonds: one is the improvement of market infrastructure, such as the “Bond Connect”, and the other is the relatively high interest rates of government bonds in China, comparing to other large economies.

The international development institutions, such as the AIIB and EBRD, play a more comprehensive role in scaling up green finance in emerging economies. On one hand, they engage and assist local authorities in assessing the challenges and making new policies; On the other hand, they are usually the anchor investor in many green projects. The issuance of a few green bonds in some emerging economies have not only supported green sectors, but also prompted the discussion on setting up national green taxonomies and policy incentives.

Experts from Lianhe Equator, a third-party verifier in China, also pointed out that the consistency between the EU taxonomy and the Chinese green bond taxonomy can imply great opportunities for cross-border green capital flows and investments. These two taxonomies share similar environmental goals and categories, and have left out the usage of coal, though the difference lies in the technical standards under different country circumstances.

The speakers agreed that it is essential to align new green financial products with the UN SDGs, while paying attention to the risks associated with new asset categories. Active participation to this webinar also indicated that this is one of the most popular topics among GIP members.