Green bonds still account for just a tiny share of total debt issuance in China despite a concerted push for growth in sustainable financing from Beijing since the unveiling of carbon targets last year.
A new report from Ernst & Young (EY) has found that green bonds account for less than 0.5% of China’s total domestic bond issuance.
The “Path for Transition of China’s Energy Sector against the Background of Twin Carbon Targets” (双碳背景下中国能源行业转型之路) report said that a range of problems had impeded the participation of issuers, intermediaries and investors in green bond issuance, including lack of unified regulatory provisions and inadequate policy incentives.
Li Jing (李菁), Climate Change & Sustainability Partner at Ernst & Young Greater China, points out however that there is currently the political will to overcome these barriers.
“At present there is still large room for growth given the overall green finance development level, and these problems will gradually be resolved,” she said.
The Chinese central government has pushed for an increase in green finance since the start of 2021, after last year setting the carbon mitigation targets of peak carbon by 2030 and carbon neutrality by 2060.
Li Jing said that China’s carbon targets will drive rapid growth in financial products and tools such as green bonds, green loans, green funds and green insurance, lending impetus to the transformation of the energy sector.
As of the end of 2020 China’s green loan balance was 11.95 trillion yuan, making it the world’s largest, while outstanding green bonds totalled 813.2 billion yuan, putting it in second place globally.