Published by Asia Asset Management – 21st Jan 2019
UK index provider FTSE Russell has launched its first China green bond index series, measuring the performance of 126 Mainland corporate and sovereign bonds, which together account for about three-quarters of the country’s onshore green bond market.
The FTSE Chinese (Onshore CNY) Green Bond Index Series will track securities where the proceeds are specifically used to finance climate-related or environmental projects in China, FTSE Russell says in a statement on January 17. It will gauge the performance of onshore RMB-denominated fixed-rate government, agency and corporate debt that are labelled “green” by the issuer.
FTSE Russell says the new index will allow the company to meet growing demand from its global customer base. China is one of the world’s largest issuers of green bonds.
“In 2017, China green bonds issuance represented 23% of global green bond issues and the market is expected to continue to grow significantly over the coming years,” Waqas Samad, benchmarks chief executive officer at FTSE Russell, says in the statement.
Figures from the index provider show that China’s domestic green bond market grew at a compound annual growth rate of 65% since 2015 to approximately US$48 billion at the end of 2017.
According to Jackie Choy, director of ETF research, Asia at Morningstar Investment Management Asia, FTSE Russell may eventually license the index to local asset managers to create green bond exchange-traded funds (ETFs), a product which isn’t available in the Asia ex-Japan region.
“Green bond ETFs may gain traction from local institutional investors, especially for those who intend to include environmental, social and governance factors in their portfolios,” Mr. Choy tells Asia Asset Management.
But he says the index provider will have to customise the composition and methodology of the benchmark in order to meet specific demand from institutional investors.
