The Shenzhen Stock Exchange and the Luxembourg Stock Exchange have launched a green bond index series, including the first Chinese green bond index to provide synchronous quotes between China and Europe. The new index series will act as a market benchmark for the increasingly mainstream green bond market in China, and may serve to underlie future investment products including exchange-traded funds.
The CUFE-CNI Green Bond Index Series harnesses the research capabilities of, the International Institute of Green Finance, part of the Central University of Finance and Economics in Beijing.
The CUFE-CNI Green Bond Index Series was created in partnership with, and harnesses the research capabilities of, the International Institute of Green Finance, part of the Central University of Finance and Economics in Beijing.
Green bonds are debt instruments whose proceeds are used to finance environmentally-friendly projects. All securities on the newly-launched indices are in line with the Green Bond Endorsed Project Catalogue, which recognises the following six environmental sectors eligible for financing via green bonds: energy saving; pollution prevention & control; resource conservation and recycling; clean transport; clean energy; and ecological protection and climate change adaption.
Securities that allocate use of proceeds to at least two of the above categories are also eligible. A bond will also be treated green if at least 95% of the issuers’ revenue comes from these environmental sectors.
Speaking at the series launch event, Robert Scharfe, Luxembourg Stock Exchange Chief Executive, commented: “Today’s decision to launch and display three new indices tracking China’s green bond market is part of a joint effort to help bridge the gap between Europe and China, the world’s two largest green bond markets. Such cross-border cooperation is crucial if we are to build the necessary scale to successfully transition towards sustainable economies and achieve our global climate change targets.”
Dr. Wang Yao, Dean of the International Institute of Green Finance, added: “As the first cross-border synchronous display of Chinese green bond index series, the publication of the index series will help raise the international influence of China’s green finance, attract foreign investors to participate in the construction of China’s green financial system and promote the development of green industries in China.”
The new index family consists of three indices: the CUFE CNI High Grade Green Bond Index, the CUFE CNI High Grade Unlabeled Green Bond Index and the CUFE CNI High Grade Labeled Green Bond Index.
The CUFE-CNI High Grade Green Bond Index is a composite total return index made up of the CUFE-CNI High grade Unlabelled Green Bond Index and CUFE-CNI High grade Labelled Green Bond Index.
The CUFE-CNI High Grade Unlabelled Green Bond Index is a total return index representing unlabelled green securities listed on the inter-bank and stock markets in Shenzhen and Shanghai since 2007.
The CUFE-CNI High Grade Labelled Green Bond Index is a total return index representing labelled green securities listed on the inter-bank and stock markets of Shenzhen and Shanghai since 2016.
As of March 2017, the CUFE CNI High Grade Green Bond Index has an annualised return of 5.4% since 2012, and the average remaining maturity of the index constituents is 4.8 years.
The new index series follows shortly after the first green bond ETFs came to market. European ETF provider Lyxor was first to market by launching its Lyxor Green Bond UCITS ETF (CLIM) on Euronext Exchange. VanEck shortly after followed suit with the US launch of the VanEck Vectors Green Bond ETF (GRNB) on NYSE.