Green bond issuance in China grows 35 per cent to record US$155 billion in 2022 as nation strives to meet climate goals

Growth shows China’s climate commitment is increasingly integrated into its policies, says non-profit Climate Bonds Initiative
Hong Kong can play key role in mobilising capital flows to support its own and mainland China’s carbon transition, organisation says

Business of climate change

Martin Choi

Published: 7:00pm, 9 Jun 2023

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Green bond issuance in China grew 35 per cent last year to reach a high of US$155 billion as the country’s climate commitment became further integrated into its overall policy and economic system, according to a report by UK-based non-profit Climate Bonds Initiative (CBI) on Friday.

The world’s second-largest economy must rapidly scale up its sustainable-debt markets to help achieve its goals of becoming carbon neutral by 2060 and peaking emissions before 2030, according to the report, China Sustainable Debt State of the Market.

Green bonds are fixed-income securities designed to fund environment-friendly projects.

“China’s economic and social development have underpinned the growth of a formidable [sustainable] debt market with unique characteristics,” according to the report, jointly released by CBI, China Central Depository & Clearing Research Centre, CIB Research and Standard Chartered Bank. “This experience can support whole-economy transition by extending access to capital to entities operating in the hard-to-abate sectors.”

A 2019 file photo shows a photothermal power station built in Gobi desert in Hami, in northwest China’s Xinjiang Uygur Autonomous Region. Photo: Xinhua

In 2022, China was the top source of green bonds that were aligned with the CBI’s definition and included in its database, which screens debt instruments from over 80 jurisdictions based on the non-profit’s taxonomy, allowing for comparison across markets.

China recorded US$85.4 billion of green bond offerings that met CBI’s definition last year, from both onshore and offshore issuers, followed by the US with US$64.4 billion and Germany with US$61.2 billion, according to CBI.

China’s cumulative green bond volume in CBI’s database reached US$289.6 billion at the end of 2022, coming second after the US with a total volume of US$380 billion.

Hong Kong raises US$6 billion in city’s biggest green bond offering

“Key strategic industry development initiatives from China, such as its hydrogen development plan, EV [electric vehicle] manufacturing and renewable energy capacity expansion, will continue to have important implications to the world,” according to the report.

“[Sustainable] debt instruments will be an important channel through which to tap into those opportunities.”

Meanwhile, Hong Kong can play an important role in mobilising the capital flow required to support both its own carbon transition and that of mainland China, according to CBI’s Hong Kong Green and Sustainable Debt Market Briefing 2022 report, also released on Friday.

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“The specialty for Hong Kong is that it has its own climate agenda and also serves as a green-financing platform for nearby countries and regions,” said Deng Manshu, deputy head of the China programme at CBI, speaking on a panel at the non-profit’s Climate Bonds Connect 2023 Asia-Pacific conference on Friday.

Hong Kong made its biggest green bond issuance on June 1, raising US$6 billion in a multicurrency deal as part of the government’s push to establish the city as an international green financing hub.

The Hong Kong government has issued almost US$16 billion of green bonds since the inaugural deal in 2019, Secretary for Financial Services and the Treasury Christopher Hui Ching-yu said at an industry conference last month.

At the end of May, the Hong Kong Monetary Authority launched a discussion paper to gather feedback from stakeholders on developing a local “green taxonomy” framework, which would classify economic activities considered environmentally friendly or sustainable.

The tremendous growth of green and sustainable bonds and loans arranged in the city reflects Hong Kong’s growing importance as a regional and international hub for green and sustainable finance, according to CBI’s Hong Kong report.

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