Shanghai Pudong Development Bank and China Industrial Bank this week raised 30 billion yuan ($4.56 billion) in funding for environmental projects, including efforts to cut carbon emissions, as they held their first green bond auctions.

The two banks were last week picked by the Chinese government as the first two financial institutions to be awarded quotas for fundraising through green bonds, each allowed to raise 50 billion yuan over three years.

Both held over-subscribed auctions this week, achieving a bid-offer ratio of 2 as investors showed initial interest in the new type of bonds, which the government hopes will drive investments of 300 billion yuan annually to cut carbon emissions, improve energy efficiency and alleviate the nation’s massive air and soil pollution problems.

The yield of the bonds is fixed at 2.95% per year.

Shanghai Pudong Development Bank raised 20 billion yuan in its auction, and China Industrial Bank raised 10 billion.

According to government rules for green bonds released in December, the projects picked by the two banks will be subject to rigid information disclosure standards, and auditing and assessment reports will be released to the market.

The projects will contribute to cutting China’s greenhouse gas emissions, but may also limit supply in the carbon offset market as they represent an alternative source of funding for project developers.

By Stian Reklev – stian@carbon-pulse.com

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