China issued 255 billion yuan (US$36.9bn) worth of green bonds in 2016, dominating the global market in climate-friendly infrastructure investment.
It is a remarkable surge since clean energy company Goldwind released the country’s first green bond in July 2015.
The figures compiled by Climate Bonds Initiative and China Central Depository and Clearing Company (CCDC), a state-owned financial institution, reflect a top-level sustainable finance push.
“Developing green bond markets could help us mobilise more private capital into green projects to deal with climate change and environmental challenges,” explained Liu Fan, vice president of CCDC. “We will continue to provide support for sustaining the growth of the green bond market in China.”
After decades of rapid coal-fuelled development, China is facing smog riots and food insecurity.
As its contribution to a UN climate deal, Beijing has committed to reduce carbon intensity (greenhouse gas emissions for each unit of GDP growth) 60-65% by 2030 from 2005 levels.
The People’s Bank of China estimates between 2 and 4 trillion yuan ($320-640bn) of investment is needed annually to clean up the economy.
Its chief economist Ma Jun said: “This report shows that the green bond market has had a strong start in China, now the world’s largest green bond market. Green bonds already make up 2% of Chinese bonds, whereas globally the figure is less than 0.2%.
“But the potential is tenfold, because 20% of investments in China need to be green to meet our national objectives. So we expect the green bond market to continue to have very strong growth.”
International standards for what may be classed as a “green” bond have been under development since 2007. These offer investors assurance that their money is going to projects with a verifiable environmental benefit.
Globally, $81bn worth of green bonds last year were aligned with those standards, including two thirds of the Chinese offerings.
Rules within China are more relaxed, counting retrofits to fossil fuel power stations and “clean” coal as eligible investments. Of the $36.9bn Chinese green bonds released last year, $12bn only met these looser guidelines. But the report said many of these had the potential to be brought into line with international norms.
Sean Kidney, CEO of the Climate Bonds Initiative said Chinese policy was helping to scale up the market. “I’m confident that the exciting domestic policy developments will allow China to continue to be a global leader in both these areas in 2017.”