China is shifting the green bond market with “green financing”

Going green has emerged as a key component of China’s future growth plans, and recent developments show the push for sustainable development is only increasing.

President Xi Jinping endorsed green finance yet again last week, this time on the country’s biggest stage at the twice-a-decade Communist Party congress. Meanwhile, Hong Kong’s de facto central bank is reportedly planning to issue a green bond next year to attract global investors and cultivate a local market.

The global green bond market has developed rapidly over the past decade, providing investors access to an asset class that satisfies responsible investing,cESG (environmental, social and corporate governance) mandates and is intended to deliver competitive returns.

Facing an imperative to address pollution concerns and finance sustainable development under its Belt & Road Initiative policy, China’s appetite for green bonds has continued to grow.

There is no single definition for what qualifies as a green bond, but the market generally accepts that the issuer will use bond proceeds to support projects that improve the environment. Such projects include flood and watershed management in China, mass transit development in Colombia and efficient irrigation use in Tunisia.

The world’s first green bond was issued by the European Investment Bank in 2007 under the banner of a €600 million (US$696 million) Climate Awareness Bond. Since then, more than 40 countries and supranational organisations have issued over 1,100 green bonds, representing over US$270 billion in total issuance.