Since the first issuance in 2007, the green bond market has grown from a niche US$1.5 billion in 2007 to mainstream, with US$258 billion of issuance in in 2019. China, the largest emitter of greenhouse gas (GHG), is one of the leading players in the global green bond market. The development of the Chinese green bond market is an important part of China’s ambitions to transition towards sustainability, a shift that needs an additional US$6.4 – 19.4 trillion in investment. China’s domestic green bond market has more than tripled from US$29 billion in 2016 to US$98bn by April 2019, representing 30% annual growth rate in issuance.

By one measure, the green bond movement has been a clear success: it has created a splash that has raised awareness about sustainability and the investment part of the sustainability equation. But beyond the useful publicity, to have real and measurable impact, we need to be certain that the projects being financed are in fact greener than the alternatives. Furthermore, we need to see whether there has been an impact on investment in delivering (1) better financing terms (a lower cost of capital, longer tenor or larger financing); (2) encouraging greater environmental integrity for projects and (3) additionality, in enabling green projects and infrastructure otherwise not possible without the attraction of green finance options.

Our report presents the methodology for a desktop-based assessment of the productivity of green bonds in China. It presents a framework for this assessment, results from our analysis of select issuers and a guide for future research and analysis. Ultimately, we hope that our assessment can help investors and policymakers evaluate the mission impact of green bonds to inform guidelines, market structures and investments in green bonds in China.

This report is part of a project supported by the UK PACT Programme that includes Green finance in China: achieving sustainability through finance.

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