Green and sustainable finance are moving into the mainstream in Chinese financial markets, with both investors and issuers showing more interest. Only 22% of investors said they were unwilling to consider investing in a green or sustainable way. Meanwhile, two-thirds of issuers are open to raising finance through green and sustainable debt.
This confidence is driven in part by the success story of China’s green bond market. The first renminbi-denominated green bond was listed on the London Stock Exchange in 2015, but by 2019, China had issued US$31.3 billion in green bonds that met international standards, second only to the US’s $51.3 billion1. A further $24.2 billion in green bonds issued in China last year did not meet global standards, either because they partly funded fossil fuel projects or because they did not meet CBI’s threshold requiring that 95% of proceeds go towards green assets.
Significant support from the government has helped to fuel investor appetite, allowing China to rapidly develop one of the largest green bond markets in the world. Both investors and issuers are comfortable in this market, with 71% of issuers/investors saying it is a very well or well developed exchange.
China’s green bond market is considered a highly effective aspect of green finance, with investors rating it first among seven measures of Chinese green and sustainable finance’s effectiveness. It comes out ahead of official measures and guidance, as well as the efforts of banks, companies and investors’ commitments to be more sustainable.
Obstacles among eligible issuers in considering green bonds are a lack of financial incentives and a perception that this form of debt as too expensive. This may be linked to the number of issuers that reported they were worried that they lack the expertise to issue green bonds.