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July 7, 2020

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China leads world in green bonds

China cemented its position as the world’s leader in green bonds market, with 386.2 billion yuan (US$55.8 billion) issued in 2019 — up a third on 2018.

China, the US and France again led the annual country rankings in a study by Climate Bonds Initiative and the China Central Depository & Clearing Co Ltd Research Centre, with the support of HSBC.

Green bonds are for environmental projects.

The Industrial and Commercial Bank of China was the largest issuer in 2019 with US$5.3 billion, plus an additional US$600 million in green bonds issued on the Hong Kong Stock Exchange through its subsidiary, ICBC Financial Leasing. In the past year, non-financial corporates became the largest issuers, with an increase of 54 percent year on year and representing over one third of the total.

The increase has outpaced financial companies, which had dominated issuance since 2015, the report said.

Around a fifth of green bonds were issued in the offshore market, with 15 issuers raising a total of US$12.5 billion, an increase of 30 percent year on year.

The Hong Kong stock exchange remained the largest venue for Chinese offshore green bonds, accounting for more than half of total offshore volume. More than three quarters (76 percent) of the deals were in US dollars.

The euro ranked second (12 percent), followed by the yuan (8 percent) and Hong Kong dollars (4 percent).

Transport was the most funded sector (35 percent) by offshore green bonds, closely followed by low carbon buildings at 32 percent. And low carbon transport and water infrastructure are the most funded project types.

Local government financing vehicles accounted for US$6.2 billion of issues in 2019. Guangdong, Anhui, Hubei, Jiangsu and Shandong are the top provinces for green bonds.

The government’s role in providing consistent and credible policy signals will continue to be paramount for the sustained and orderly growth of China’s domestic green bond market, according to the research.

“The tremendous potential for China to become the global engine room in the 2020s for green finance is reflected throughout this report,” said Sean Kidney, CEO of Climate Bonds Initiative. “Increased offshore issuance, harmonization and alignment is making the domestic market increasingly attractive to international investors.”

The Climate Bonds Initiative was founded in 2009.

It is the only organization in the world dedicated to mobilizing the US$100 trillion bond market for climate change solutions.

“We promote investment in projects and assets necessary for a rapid transition to a low carbon and climate resilient economy,” the Initiative says on its official website.


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