China sees bumper demand for debut international green bond

By Marc Jones and Scott Murdoch

LONDON/SYDNEY, April 2 (Reuters) - China saw strong demand for its debut sovereign green bond on Wednesday, with investors saying it was a welcome sign for the sustainable debt market as the United States backpedals from its climate commitments.

Bankers selling the modestly sized 6 billion yuan ($825 million) bond, which is to be listed in London, told potential buyers that demand for the dual three- and five-year tranche bond had surged to 47 billion yuan ($6.47 billion).

The final price dropped to 1.88% on the three-year tranche, having initially been set at 2.3%, and to 1.93% from 2.35% on the five-year tranche.

Green bonds are intended to finance investments needed to tackle or adapt to climate change and to boost sustainable economic development.

The Chinese Finance Ministry's director general, Yu Hong, and his deputy director general, Xing Chaohong, met with investors in London on Tuesday and outlined a list of projects the money could be spent on, ranging from electric car charging and national parks to hydroelectric projects.

"It is a relatively powerful signal, as it comes at a time when the U.S. is pulling back from climate commitments," Nicolas Jaquier, a sustainable debt manager at investment firm Ninety One, said.

"It is a sign that China is looking to step up," he added. "It's also a good sign for other smaller emerging markets who might have been a bit tentative, as it shows that a big power is taking climate finance seriously."

China’s Finance Ministry could not be immediately reached for comment on the result of the bond sale outside of regular Beijing business hours.

It had flagged its plans earlier in the year after British finance minister Rachel Reeves met Vice Premier He Lifeng in Beijing to discuss "pragmatic cooperation" on financial services, trade, investment and climate issues.

China is the world's largest producer of climate-warming greenhouse gases, but has said it wants to bring its carbon dioxide emissions to a peak before 2030 and become carbon-neutral by 2060.

Although the sovereign green bond is an international first for China, its companies have been highly active in the market.

Moody's estimates that almost $410 billion of green bonds had been issued by Chinese companies by the end of last year. The near $50-billion-worth sold last year accounted for 8% share of global green bond issuance in an overall market which has ballooned to over $3 trillion in recent years.

The finance ministry published a green bond "framework" in February which described the government's bond plans as an effort to "attract international funds to support domestic green and low-carbon development."

($1 = 7.2685 Chinese yuan renminbi)