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22 Nov 2016
GB1 (Excellent) grade assigned to BoCom's first-time green bond issuance; first Green Bond Assessment assigned to China-based entity
New York, November 22, 2016 -- Moody's Investors Service has today assigned a Green Bond Assessment (GBA)
of GB1 to the Bank of Communications Co., Ltd (BoCom) green
bonds issued on 18 November 2016 in the form of 3-year (RMB10 billion)
and 5-year (RMB20 billion) maturities, for a combined total
of RMB30 billion or approximately USD4.4 billion.
The Green Bonds Assessment of GB1 is supported by BoCom's excellent
organizational structure and environmental project decision making processes,
its intended use of the proceeds to finance and refinance green projects
that align broadly with accepted international practices, and the
bank's stricter guidelines relative to applicable local regulatory
frameworks, procedures for the management of proceeds, as
well as very good intended quarterly and annual disclosure and reporting
practices. Reporting practices extend to disclosing, in the
green bond's prospectus, the bank's environmental and
emission reduction performance targets. These performance objectives,
however, are estimated using a model developed by the China Banking
Regulatory Commission (CBRC) and apply to the portfolio as a whole rather
than individual projects or project categories.
The environmental projects range across all the six eligible environmental
categories, classified according to the Green Bond Endorsed Project
Catalogue in the People's Bank of China's (PBoC) Announcement
#39, i.e. energy saving, clean transportation,
clean energy, ecological protection and climate change adaptation,
pollution prevention and control, resources conservation and recycling.
The bank has already internally identified a pipeline of eligible green
projects with an estimated value larger than the issuance size of the
green financial bond. Proceeds will be allocated to eligible projects
that meet the PBoC's guidelines after the close of the transaction
with the expectation that the allocation process will be completed within
a year of closing.
While this is its first green bond offering, BoCom's green
credit strategy, which is focused on supporting and financing environmental
and social projects, has been in place since 2008. Since
2008, BoCom has continuously advanced its green credit practice
by increasing its credit support for energy saving and environmental protection.
To implement its environmental lending activities throughout its operations,
BoCom has put into effect a comprehensive, rigorous and formal organizational
structure and decision making process that integrates all levels of the
organization to consider and qualify the eligibility of environmental
projects in line with applicable rules and regulations. In particular,
these include the PBoC's Announcement covering the issuance of green
financial bonds and the CBRC green credit standards. At the same
time the bank has internally adopted a 3-color-7-category
screening policy to restrict projects with previous environmental violations
while emphasizing safe operations and Environmental Protection Bureau
verifications, pursuant to its Green Credit Policy published in
2012 and the Administrative Measures on the Proceeds of Green Financial
Bond adopted in 2016.
In addition to financial risks, the bank's green credit practice
is characterized by a comprehensive system for evaluating the environmental
and social risks of its customers regardless of size throughout the credit
granting process, including credit review, post credit management
and fund appropriation. As cited in its 2015 CSR report,
BoCom has developed "industry-specific green credit management
guidelines and implemented classified management according to the characteristics
of customers and projects in different sectors, and evaluated the
environmental and social risks of customers and projects from such aspects
as energy consumption, pollution, land, health,
safety, resettlement, ecological protection and climate change."
The proceeds from BoCom's offering will be used to finance and refinance
projects aligned with the guidelines promulgated by the PBoC, CBRC
as well as the bank's own guidelines. A preliminary portfolio
of eligible projects has been assembled and the proceeds from the bond
offering will be allocated to green projects as soon as possible,
in accordance with BoCom's screening criteria and decision making
process. These projects will also be aligned with the use of proceeds
factor in Moody's GBA methodology corresponding to a GB1 grade.
According to the bond prospectus and considering BoCom's pipeline
of green projects , the bank has established the following environmental
and emission reduction performance targets for the portfolio as a whole:
reducing use of standard coal by 0.8 -- 1.6 million
tons, carbon dioxide emission by 2 -- 4 million tons,
chemically manufactured oxygen emission by 15,000 -- 30,000
tons, ammonium nitrate by 1,000 -- 2,000 tons,
sulphur dioxide by 2,000 -- 4,000 tons, nitrogen
oxide by 400 -- 800 tons, and saving 1 -- 2 million tons
Proceeds from the green bond issuance will be transferred to an account
designated by BoCom, accounted for in accordance with relevant rules
and unallocated funds will invest in green bonds issued by non-financial
corporates and money market instruments with good credit ratings and market
In addition to its regular financial disclosures, BoCom will disclose
to the market on a quarterly and annual basis the extent to which the
proceeds have been allocated, in line with PBoC guidelines.
In addition, Deloitte Touche Tohmatsu Certified Public Accountants
LLP, which has already certified BoCom's compliance to PBoC's
requirement outlined in the announcement #39 on the use of proceeds,
green projects evaluation and screening, proceed management,
related policies and internal control, will continue to undertake
external reviews of the development of BoCom's green projects and
the respective environmental impact with independent evaluation report.
BoCom is one of the major financial services providers in China.
The fifth largest Chinese commercial bank in terms of assets with extensive
domestic operations, the bank's business scope extends to
commercial banking, securities services, trust services,
financial leasing, fund management, insurance and offshore
financial services. As of 30 June 2016, the bank held domestic
market shares of 3.7% in terms of loans and 3.1%
in terms of deposits. As of 30 June 2016, it reported a consolidated
asset base of RMB8.0 trillion (USD1.2 trillion).
Established in 1908 as a commercial bank, BoCom became a state-owned,
joint-stock commercial bank in 1987. As a result of a major
reorganization and restructuring in 2004, The Hongkong and Shanghai
Banking Corporation Limited (HSBC) became a strategic investor and BoCom's
second-largest shareholder, after the Ministry of Finance.
In June 2005, BoCom became the first China-based commercial
bank listed on the Hong Kong Stock Exchange. In 2007, it
was listed on the Shanghai Stock Exchange. As of 30 June 2016,
the bank's largest shareholder was the Ministry of Finance,
which held a 26.5% stake.
Since 2008, the bank has firmly established the concept of green
development and the great importance of green credit policies.
BoCom has continuously advanced its green credit practice by increasing
its credit support for energy saving and environmental protection.
This is illustrated by the fact that as of 30 June 2016, BoCom's
loans, compliant with the CBRC's green credit standards,
stood at RMB156.6 billion, up 7.56% since end-2015
when green loans reached RMB145.6 billion and up 21.47%
over the previous year. Its commitment to this strategy is further
demonstrated by the bank's decision to publish annual CSR reports
compliant with the Sustainability Reporting Guidelines (Version 4.0)
of the Global Reporting Initiative (GRI) that has received a Statement
of Assurance by PriceWaterhouseCoopers Zhong Tian LP.
The principal methodology used in this rating/analysis was Green Bonds
Assessment (GBA) published in March 2016. Please see the Ratings Methodologies page on www.moodys.com
for a copy of this methodology.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
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if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
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For PRC only: Any "Green Bond Assessment" or "assessment"
assigned by Moody's Investors Service, Inc.:
(a) does not constitute a credit rating, rating, green bond
assessment or assessment as required under any relevant PRC laws or regulations,
and (b) cannot be used within the PRC for any regulatory purpose or for
any other purpose which is not permitted under relevant PRC laws or regulations.
For the purposes of this section, "PRC" refers to the
mainland of the People's Republic of China, excluding Hong
Kong, Macau and Taiwan.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
This publication does not announce a credit rating action. For
any credit ratings referenced in this publication, please see the
ratings tab on the issuer/entity page on www.moodys.com
for the most updated credit rating action information and rating history.
Senior Vice President
Env., Social and Governance
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
Vice President - Senior Analyst
Greater China Credit Research and Analysis
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