More Clarity Needed on China Green Bond Principles: Fitch

Fitch Ratings said the new principles provide greater transparency but lack clarity on the use of proceeds for working capital and debt repayment.

Updated guidance brings Chinese domestic green bond issuances closer to international standards, but a lack of clarity on use of proceeds allocated to working capital, according to Fitch Ratings.

Issued in July, the new China Green Bond Principles are closely aligned with ICMA’s Green Bond Principles, setting out four core components: the use of proceeds, project evaluation and selection, management of proceeds, and duration of information disclosure.

Fitch said the new principles provide greater transparency to investors on the differences between the four key types of green bonds available in China:

  • bonds with a standard green use of proceeds;
  • carbon-yield green bonds;
  • green project revenue bonds; and
  • green asset-backed securities.

But Fitch said the policy objective for the principles of reducing greenwashing risks “may be undermined” because they do not specify the types of working capital and the percentage of proceeds that can be used to repay an issuer’s debt.

Read more articles like this on Regulation Asia’s sister publication, ESG Investor.

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