Financial News

  • 18 June 2014, 10:12

Maiden Chinese 'Green Bond' To List In London

An arm of the World Bank is to list the first 'green bond' denominated in China's currency in London in a move that will be hailed by ministers as a boost for the City's global status.

Sky News has learnt that the International Finance Corporation (IFC), which is the World Bank's private sector-focused investment arm, plans to raise about RMB 500m (47m) to invest in climate-related projects.

Although modest in scale, it will represent a milestone as the first renminbi-denominated green bond issued by the IFC, and will see it listed on the London Stock Exchange.

An announcement about its completion is expected to be made by the Washington-based institution on Tuesday to coincide with the visit to the UK by Li Keqiang, the Chinese Premier, City sources said.

The news is expected to be hailed by David Cameron and George Osborne as a vital step in positioning London as the premier offshore centre for financing using the Chinese currency, they added.

That message is likely to be given particular emphasis because of the extent to which the UK's financial markets have come under scrutiny amid probes into manipulation of critical benchmarks such as foreign exchange and Libor.

The IFC is a major global development institution which taps financial markets to invest in projects across the developing world, and was influential in creating so-called Panda bonds in China and Dim Sum bonds in Hong Kong.

In March, it issued a RMB1bn (94m) bond in London - also the first of its kind - which it said would support the internationalization of the Chinese currency.

At the time, the Chancellor said:

"Nearly two-thirds of all Renminbi activity outside of greater China takes place in London and IFC's decision to issue in London provides yet more evidence that the capital is the western hub for Renminbi.

"The Government will continue to work very closely with the private sector and the Chinese and Hong Kong authorities to build a thriving RMB market in London."

The proceeds of 'green bonds' are set aside to invest in renewable energy and energy-efficient projects, and are designed to help address the vast funding gap for such initiatives.

Sources familiar with the latest IFC deal said there had been significant interest from investors.

The IFC's RMB 'green bond' issue will form part of a package of City-focused deals designed to underpin its pre-eminence as a global financial centre.

China Construction Bank is to be designated as the first offshore clearing bank for the Chinese currency, while Industrial & Commercial Bank of China will be given permission to establish a wholesale branch in London.

UK-based companies are also expected to be given new assistance in financing China-focused transactions through a separate Government deal involving the Export Credit Guarantee Department, sources said.

Other trade and business deals announced during Premier Li's visit will include major projects and supply agreements involving BP and Shell, as Sky News revealed on Monday.

A Treasury spokesman declined to comment.

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