China ranks No.2 in global green bond issuance, US$ 37.1 billion in 2017

China cemented its position as a key player in the global green bond market with policy support, a growing momentum at local level and a diverse issuer types and use of proceeds.

In the past year, China has cemented its position as a key player in the global green bond market with a raft of policy developments, a growing momentum at the local level and a diversification of issuer types and use of proceeds.

Following a record-breaking year in 2016, China’s green bond market registered a 4.5 percent year-on-year increase to total US$ 37.1 billion in the past year, according to a latest annual report from the Climate Bond Initiative.

Despite tepid growth in issuance in the first quarter of 2017, momentum began to pick up in the second quarter and into year-end, making China the second largest source of green bonds in the world, second to the US.

The report, supported by HSBC, was published jointly by the Climate Bonds Initiative, a London-based non-profit group which promotes green bonds and runs global standards and certification scheme, and China Central Depository & Clearing Company.

The rapid growth in green bond market over the past two years has been primarily due to the implementation of regulation and policy levers, according to the report.

It added that 2017 saw new policy developments to promote green bonds as a tool to finance environmental solutions, as President Xi Jinping called for promoting green development in his recent speech at the 19th National Congress, which includes developing green finance.

The past year also witnessed the first mention of green opportunities in the Belt and Road Initiative, which will be a potential game changer for green infrastructure across the region.

The report noted that there are a more diverse issuer types. Although financial institutions accounted for almost a half of the 2017 issuance, or the largest proportion, the number has fallen from a record high of 73 percent in 2016.

With the largest commercial banks the regular issuers, more local and regional commercial banks like Bank of Beijing and Bank of Yantai are joining the team.

Another emerging trends, the report noted, is that bonds issued by local government are on the rise. The number reached US$ 3.7 billion, making up 10 percent of the total green bond issuance of last year.

Clean energy, low carbon transport and waste management are the top three themes for the use of green bond proceeds in 2017.

Looking forward, the report added that as one of the world’s largest builders of green infrastructure and one of the largest green bond markets, China will account for a big slice of the US$1 trillion pie for the green bond issuance per year by 2020. To meet that end, it will require the issuance in the country to grow tenfold in just three years.

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