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Green Bonds in China: the State and Effectiveness of the Market / 中国绿色债券市场:趋势与分析

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Published: June, 2020

China’s green bond market expanded rapidly from 2016-2019, growing to the second largest green bond market globally. Through new and extensive primary data collection by CPI and the International Institute of Green Finance (IIGF), we account for more than USD 120 billion of cumulative issuance.

Cumulative impacts of these green bonds, as reported by issuers, are a reduction of more than a 52.6 million tons of CO2e and at least 11.2 GW of installed clean energy capacity added. However, overall impacts are difficult to determine due to large data gaps resulting from a complex regulatory framework with inconsistent guidelines.

Our research looks at several key factors in the market:

  1. Who is issuing bonds
  2. How are those proceeds being allocated
  3. What has been the environmental impact of the China green bond market
  4. What is the current regulatory framework, and how does it impact the market
  5. What are the data gaps in the market

In general, participation in the green bond market in China is limited in its diversity. Most issuers are large entities with strong credit ratings. Nearly all investors are domestic.

The research also leads to several recommendations on how the market could operate more efficiently. These include:

  1. Simplifying the regulatory framework
  2. Clarifying incentives and guidelines
  3. Updating credit rating regulations to diversify the domestic issuer and investor base
  4. Strengthen the MRV system to boost credibility and attract more foreign investment. Foreign investment is underrepresented compared to other similar bond markets, at around 1.6% of the total value of outstanding China green bonds.

Read the full report: Green Bonds in China–the State and effectiveness of the Market

A supplement to the main report, “MRV System Design: Recommendations for Chinese Green Bonds,” details findings from an in-depth review of Monitoring Reporting and Verification (MRV) practices in China comparing them to international practices. The MRV report analyzes findings from a review of 387 issuances, and provides eight specific recommendations to improve trust, transparency, and effectiveness in the market by improving the quality of China’s green bond MRV.

CPI and IIGF also conducted two webinars, one in English and one in Mandarin, to review the report findings and engage members of the green bond and climate finance community on a robust Q&A.

English Webinar

 

Mandarin Webinar / 网络研讨会: 中国绿色债券市场

 

 

 

This project is supported by the UK PACT Programme.