Research On Risk Management Mechanism Of China's Green Bonds

This paper explores the theoretical basis of the development of green bonds based on its definition and characteristics,compares the practices of green bonds in China and abroad,then elaborates the meaning,basis and operation of green bonds risk management mechanism,by studying risk analysis and risk control of it.Apart from risks shared by ordinary bonds,such as interest rate risk,policy risk,credit risk and liquidity risk,green bonds issued in China also face some specific risks including those associated with project investment compliance,green project management by the issuer and with fund usage and management.As for green bonds risk controlling in China,this paper studies the internal model of risk control,namely establishing internal risk control system and actively seeking third party certification body review,by citing Industrial Bank as an example.Furthermore,this paper analyzes the external model of risk control,which includes specification of green project categories,establishment of internal management conditions for the issuers,special management of raising funds and requirement of a Letter of Commitment and mandatory information disclosure from the issuers.Finally,this paper points out problems with green project management,namely lacking of experience,disunity in terms of issuance guideline as well as disunity of rating method due to the classified supervision etc.In the end,this paper puts forward six suggestions for green bonds issuers and regulators,hoping to improve the green bonds risk management mechanism.These suggestions include,developing a comprehensive internal risk management system,setting up a professional project management team,improving quantitative risk analyzing skills,establishing a unified green bonds guideline,improving third party certification and supervision mechanisms,and leveraging local government support.