Big state-owned lender China Construction Bank (CCB) has become the first Chinese lender to underwrite debt instruments linked to sustainable development and renewable energy targets.
According to state-owned media CCB has just served as lead underwriter for a slew of “sustainability-linked bonds,” primarily for Chinese power companies who commit to increase the share of renewable energy in their generation portfolios, or else see increases in the coupon rates for their debt issues.
The bond issue by China Yangtze Power (中国长江电力股份有限公司) is linked to targets for renewable energy installations, with the company undertaking to install renewable energy capacity of no less than 7100MW by the end of 2023, and increase renewable energy installations by no less than 45% compared to the end of September 2020.
The sustainability-linked bond issue for GD Power Development (国电电力发展股份有限公司) is linked to targets for raising wind power capacity. GD Power undertakes to increase wind power capacity during the period from 1 January 2021 to 31 December 2022 by 11.9% compared to the end of 31 December 2020.
Huadian Fuxin Energy Corporation Limited’s (华电福新能源有限公司) sustainability-linked bond involves a commitment to increase wind and solar power capacity to 25,000 MW by the end of 2023, for annual compound growth of 28.22% compared to the figure of 9249.9 MW for the end of 2019.
If the above targets are not met, then the three bonds will see their annual coupon rates increase by 25 basis points, 20 basis points and 50 basis points respectively.
CCB has emerged as one of the leading proponents for green finance in China over recent years, with a green loan balance of over 1.3 trillion yuan as of the end of 2020.