Bank of America Corp. aims to double its underwriting of green bond deals in China over the next two to three years, beefing up its business to capture the fast-growing market, the firm’s China head said in an interview.
The Charlotte, North Carolina-based bank plans to underwrite $50 billion of green and sustainability-linked bonds, equities and loans for Chinese clients with carbon-neutral goals by the middle of the decade, according to Wang Wei, China country executive for the bank.
That in turn will lead to 50 per cent annual growth in revenue for the business, said people familiar with matter, asking not to be named discussing internal goals. The bank is also pushing into project and equity financing, hedging and investment products across the region.
To achieve the jump, it’s doubling the size of its capital markets team focused on environmental, social and governance-based investing strategies in Asia, adding four new hires to the three people currently on the team, according to people familiar with the bank’s plans.
“China will be paying huge attention to ESG in the next decades,” said Wang. “It’s under immense pressure to develop the discipline.”
The global financial industry has made a swath of pledges and promises related to fighting climate change, but action, particularly in the Asia-Pacific region, has been slower. Bank of America is one of the first of the big U.S. banks to make explicit its targets for green financing in China.
At the same time, the Asia goals are only a small fraction of the bank’s overall plans, even though China is the world’s biggest green bond market and a heavy emitter. The U.S bank in April announced a goal to provide $1 trillion in financing to accelerate the transition to a low-carbon economy and another $500 billion to address social investment goals.
Of that, 20 per cent to 30 per cent “will need to come from Asia for us to make any difference,” said Feng Chang, who’s appointed as a managing director of global sustainable finance group for Asia.
In China, the bank is seeking to provide seed money or other financing options in solar, wind and battery-making sectors and invest in high-emission companies that are at an early stage in hydrogen and carbon capture technologies, helping accelerate efforts to phase out fossil fuel consumption.
China added a record amount of solar power last year, and is likely to do so again this year, driven by a nationwide push for more rooftop installations and a build-out of renewables in its northern deserts. Still, its share of coal and gas in power generation was still as high as 71 per cent in 2021, the same as 2020.
The pipeline in China is building “very quickly,” said Chang, who previously led cross valuation adjustment trading. Her new role, she said, is similar to her earlier job of pricing risks after the financial crisis.
“This time, it’s not just funding risk, it’s climate risk,” she said. “The stakes are so high. The bank is a very important piece of the puzzle in this whole climate transition.”
© 2022 Bloomberg L.P.