China Securities Regulatory Commission (CSRC), the main regulator of the securities industry in China, released a new set of guidelines to support the issuance of green bonds on March 2, 2017.
The policy support and market growth provides foreign investors and businesses operating in China with a wide range of opportunities: foreign investors can profit the support of a state-run program, while China-based businesses can fund eco-friendly projects with relative ease.
The People’s Bank of China (PBOC) has made it clear that public investment alone is not enough to meet the funding requirements needed to drive green and environmentally-friendly solutions, and has set out to make green bonds a powerful financial alternative to attract foreign investors.
Companies in industries that have high emissions or energy usage, such as in the oil industry, will not be allowed to issue green bonds.
The process to become a green bond issuer are as follows: First, companies are required to disclose their projects and the details of its assets (the same process is undertaken by normal bonds issuers); A company can then chose independent review to secure its reputation or submit details of the project directly to the relevant regulator according to its nature (see the table below); After being approved, the company can start to issue green bonds.
Utilizing government incentives The Chinese government has been making efforts to attract green investors and support green projects at a time when many companies are increasingly taking action to combat climate change.
Companies that will address such interests will not just only be rewarded by the government and potential investors, but by a fast-growing green market.
Tax incentives, funding opportunities, government support, and the high demand for these kind of products and services create the right scenario for successful business.
Although entering the Chinese market requires a detailed business plan, the range of incentives offered by the government for green projects and responsible companies make investments in China worthwhile.
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