China’s Three Gorges Corporation issued its first offshore green bond last week. The state-owned firm, which issued the largest corporate green bond in China last year, builds large hydropower projects and has received much criticism for its ESG profile. The Three Gorges dam is the largest hydropower project in the world, flooding 13 cities and 140 towns and relocating more than 1.2m people.

This is the first time Three Gorges has issued an offshore green bond, and it roadshowed in Asia and Europe as part of the process. “China Three Gorges raised the bar in terms of presenting directly to green bond investors on an extended European roadshow,” said Nick Darrant, Executive Director of EMEA Syndicate at JP Morgan, which was a joint global coordinator on the deal, along with Bank of China and Deutsche Bank.

The seven-year deal came in at €650m with a coupon of 1.3%. “We were pleased with the results,” Darrant told RI. However, some European green bond investors did not buy the notes for ESG reasons. “China should be applauded for its commitment to ‘clean’ its energy sector,” said Affirmative’s Kinnersley, who added that Three Gorges is a key part of the national climate strategy. “But a Three Gorges ‘green bond’ should be strongly questioned,” he told RI, pointing to a series of environmental and social risks associated with the dam. These include its apparent contribution to earthquakes, methane emissions and changes to water regimes that harm the fishing industry and biodiversity; as well as the displacement of people. “Unless the green bond compellingly and specifically addresses [these] environmental and social problems… it is likely it is being issued to ‘up the green creds’ of the Three Gorges Corporation. OK. Call it greenwashing. This is why AIMwill not buy the bond at this stage.”