Ma Jun, the architect of China’s booming green bond market, has confirmed that he is standing down in November. He will not be replaced. Ma Jun has become the poster boy for green finance during his three years at the People’s Bank of China – the country’s central bank.
He is currently fulfilling a six-month extension period to his contract, which expired in May. Jun said in an email to the press that during the transition period “I will complete the several tasks at hand within the Bank”. Revisions to China’s green bond catalogue are expected to go ahead, in accordance with the Guidelines on Establishing the Green Financial System, jointly issued by PBOC and three other ministries in 2016.
This will mean merging the two existing sets of definitions – those from the Green Finance Committee and those from the National Development and Reform Commission – into one national set, some time early next year. There may be some amendments to technical details of the ‘clean coal’ category, which has caused controversy among some international investors.
Ma Jun will remain Chairman of the Green Finance Committee (GFC) for the coming years, despite his departure from the chief economist position at the PBoC. He was appointed to the chairmanship of the GFC, which was set up by the PBoC, in 2015 for a four-year term and will finish this as initially agreed, in 2019.
The work on ‘harmonising’ green classifications will continue between the GFC and the European Investment Bank, in a bid to create a more standardised language in the market, even when regions have different definitions.
So, on the surface, it looks like not much will change. Ma Jun will be posted to Tsinghua University, at a centre with a strong connection to the PBoC and other policy making bodies, where he will head up policy research in areas such as macroeconomic policy, financial risk, the ‘Belt and Road’ trade and infrastructure initiative, and green finance.
In terms of the future role of the G20’s Green Finance Study Group, it is not yet known: the initiative was launched under China’s G20 presidency in 2015 and is chaired by the PBoC and the Bank of England. Each year the new G20 presidency must state whether it wants the group to continue its work. That was done last year by Germany, ahead of its current presidency, and it is now down to Argentina to decide whether it would continue to support the group in 2018. Decisions are normally announced in October at G20 annual meetings. If it supports the group, and its current chairs, many market participants hope that China will find a way for Ma Jun to continue his leadership, despite having left his official post at the central bank.Elsewhere in Asia, in a hard-hitting article published in India’s Patna Daily, climate finance specialist Anandi Sharan slams green bonds issued by the Asian Development Bank and others, saying “people are so deluded about the efficacy of the ideology of return on investment for mitigating and adapting to climate change”. In the piece, titled Indignity of Green Bonds: the example of the ADB, Sharan lays out the financial reasons why the on-lending costs attached to these green bonds have “devastating” effects for many farmers in India.
The comments come on the back of ADB’s $1.25bn dual-tranche green bond earlier this month, prompted by what Treasurer Pierre Van Peteghem described as “rapidly growing demand” for the asset class. The bank wants to double its annual climate financing to $6bn by the end of the decade. BRICS Bank – otherwise known as the New Development Bank – is also reported to be preparing to issue its second green bond in renminbi, to finance projects in India, China, Brazil, Russia and South Africa. NDB says it issues in local currency to keep on-lending costs down for the end-users.
The Climate Bonds Initiative wrote its latest blog on India, saying its muni bond market is “on the cusp of change” and may spawn more green issuance out of the country.
Transaction-wise, it has been a quiet week in the market. Tesla announced further details of its upcoming bond, but there is still no suggestion that it will label it green. Colombia’s Bancoldex sold 200bn pesos ($67m) of five-year green bonds to local investors, in the first green bond to be available through the Colombian stock exchange. The order book reached more than 2.5 times the offering. The deal, which had structuring support from the Inter-American Development Bank, was unusual because it explicitly linked proceeds to the country’s Nationally Determined Contributions.
A corporate green bond is reportedly underway in Lagos, Nigeria, with a coupon of 17.5%. The N50b deal has been issued through a public-private partnership and the first tranche – for N27b – is understood to be in the market this week. The five-year notes will finance sanitation, energy and wastewater in Lagos State.
Contact Energy, a listed firm in New Zealand, has launched a Green Loan Borrowing Programme, certified by the Climate Bonds Initiative and assured by EY. The NZD1.8bn ($1.3bn) programme, described by Contact Energy’s CEO as “a broad range of certified green debt instruments”, will finance geothermal energy projects.