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Announcement:

Moody's assigns Green Bond Assessment of GB1 to the Bank of Communications Co., Ltd's (BoCom) green bond offering

 The document has been translated in other languages

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.

ASSESSMENT RATIONALE

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 of water.

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 liquidity.

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.

REGULATORY DISCLOSURES

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. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Please see Moody's Rating Symbols and Definitions on the Ratings Definitions page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see Moody's Rating Symbols and Definitions on the Ratings Definitions page on www.moodys.com for further information on the time horizon in which a credit rating action may be expected after a review or outlook action took place.

Please see the ratings tab on the issuer page on www.moodys.com for the last action and the history of the rating. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com/disclosures for further information.

Please see the ratings disclosure page on www.moodys.com/disclosures for disclosures on significant Moody's shareholders and on certain relationships between Moody's, its shareholders and/or rated issuers.

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 the rating.

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.

Henry Shilling
Senior Vice President
Env., Social and Governance
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Amanda Du
Vice President - Senior Analyst
Greater China Credit Research and Analysis
JOURNALISTS: 86-21-2057-4020
SUBSCRIBERS: (852) 3551-3077

Michael Rowan
MD-Gbl Pub Proj and Infra Fin
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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