Transition power: A clean energy project takes shape at the Wuzhengdao Economic Zone in Zunyi. Issuance of green bonds by China’s government and companies since 2015 has totalled more than US$540bil and is second only to the United States. — China Daily
SINGAPORE: China’s impending listing of an inaugural sovereign green bond in London will test appetite among international investors to shift climate bets to the world’s top polluter.
The yuan-denominated bond, scheduled to debut before the end of the year, is aimed at showcasing the nation’s green leadership credentials as the US retreats under president Donald Trump.
It’s also intended to bolster demand after Chinese issuance fell to a second annual decline in 2024.
“It’s positive that China wants to give a new impetus to the green finance market,” said Ramnath Iyer, research lead for sustainable finance in Asia at the Institute for Energy Economics and Financial Analysis.
Supporting the green bond market can also help “burnish its credentials even more,” he said.
Governments and companies globally issued about US$708bil worth of green bonds in 2024, 8% higher than a year earlier, according to data compiled by Bloomberg Intelligence.
Europe continues to dominate the market, though Asia could become a source of new growth – particularly with activity in the United States likely to remain muted, AXA Investment Managers said in a note last month.
Under Trump’s second administration, the United States has signalled its intent to withdraw again from the Paris Agreement on emissions reductions, has revoked international climate funding and is exploring legal options to cancel loans issued under a US$400bil programme for clean energy technologies.
In Europe, the green agenda is also facing pushback amid complaints about over-regulation and economic challenges.
“China is the last saviour of the green transition,” Alicia Garcia Herrero, chief economist for Asia Pacific at Natixis SA, said during a briefing this month in Hong Kong.
Green bonds could be “another layer of the argument, and there’s a lot of demand in Europe,” she said.
While carbon emissions are likely to peak in China ahead of its 2030 target, helped by the installation of record volumes of renewable energy, the nation’s climate progress remains uneven. Emissions probably expanded last year amid surging electricity demand, which helped push coal and natural gas production to records.
Issuance of green bonds by China’s government and companies since 2015 has totalled more than US$540bil and is second only to the United States, the Bloomberg Intelligence data showed.
However, those sales have been mainly onshore or in Hong Kong, and overseas investors account for only 1% of China’s green bond market.
China has so far not provided details on the planned bond sales in London, including the timing and proposed size. The issuance should be at least US$3bil, said Kuan Weng Pang, a portfolio manager at Azimut Investment Management in Singapore.
Asia’s largest economy has taken steps to attract more foreign capital by better aligning its standards with the European Union and the International Capital Market Association. In talks last month, Chinese and UK officials pledged to cooperate on products like dual-currency sustainability-related debt and biodiversity bonds. — Bloomberg
