China Aims for Green Bond Expansion With Shanghai Bourse Trial

China took another step toward expanding financing for clean energy and environmental protection with plans for a pilot program for green corporate bonds to be traded on the Shanghai stock exchange.

Under the trial, issuers are required to disclose details of projects that they will invest in using proceeds, according to a statement Wednesday on the exchange website. The bourse will encourage firms to get independent professional assessment on whether the projects qualify as green, according to the statement. It also will encourage financial institutions, brokerages, pension funds and other institutional investors to invest in the securities.

President Xi Jinping has vowed to cut pollution and shift the world’s second-largest economy toward greater focus on consumption and services rather than traditional smokestack industries. Shanghai Pudong Development Bank Co. in January raised 20 billion yuan ($3 billion) in the first green bond in China’s interbank market. Agricultural Bank of China Ltd. issued 600 million yuan of two-year green bonds in the offshore market in October.  

“This green bond initiative comes from China’s effort to transform its economic growth model,” said Ji Weijie, credit analyst at China Securities Co. “The government seems to want to lower the bar for corporate issuance of such notes by allowing them to also sell in the exchange market. But the market may not grow very fast because environmental projects are usually not profitable enough for investors to want to put money in.”

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