China 2020 green bond issuance down 21% on pandemic

Green Finance / Treasury & Capital Markets

World’s second-largest green-labelled bond issuer remains leader in emerging markets GSS bonds

The Asset 29 Sep 2021

Total green bond issuance from China during 2020 reached US$44 billion ( 289.5 billion yuan ), a 21% decrease from the US$55.8 billion ( 386 billion yuan ) achieved in 2019, with the Covid-19 pandemic deemed largely responsible for curtailing growth, according to a recent report.

The pandemic had clear implications for the green finance universe, according to the China Green Bond Market 2020 report, published by the Climate Bonds Initiative ( CBI ) and China Central Depository and Clearing Research Centre ( CCDC Research ), with the support of HSBC. China’s overall issuance witnessed a pronounced slowdown in H1 2020, but in the second six months it picked up momentum. The US, China and Germany led the annual country rankings by the total amount of labelled green bonds.

As of December 2020, the total amount of pandemic bonds ( exclusive of sovereign issuance ) issued from China reached US$210 billion. China was positioned as the number one emerging market economy in green, social and sustainability ( GSS ) issuance.

2020 report highlights:

Of US$44 billion ( 289.5 billion yuan ) worth of green bonds issued in 2020, US$23.8 billion ( 157.5 billion yuan ) worth was aligned with both Chinese and CBI green definitions
Beijing Jingneng Clean Energy is the largest Chinese issuer in 2020. This was the first time that a non-financial corporate became the largest issuer
The total volume of green bonds that carried any form of external reviews dropped drastically from 78% to 61%
Low-carbon transport remained the largest theme ( 30% ), followed by energy ( 29% ). Proceeds going to low carbon building assets have seen a big surge in both absolute values and shares
2020 saw new developments in China’s profiles of issuer types. The volume of green bonds issued by government-backed entities represents 38% of the total
China remains one of the largest global sources of bonds certified under the Climate Bonds Standard. In 2020, Chinese issuers brought four new certified deals to the market, totalling US$3.6 billion
China has one of the largest offshore green bond markets
By the end of 2020, the total outstanding amount of China’s domestic green bond market stood at US$139 billion ( 917 billion yuan )
A total of US$111 billion ( 732.6 billion yuan ) worth of green bonds in China reach maturity in the next 5 years, representing 80% of the total outstanding
With US$325 billion of climate-aligned bonds outstanding, China accounts for 36% of the overall climate-aligned universe identified by Climate Bonds Initiative.

Policy recommendations for scaling up China’s green bond market

Going forward, 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 issuance volume, yet the market stakeholders will need to keep abreast of the rapidly evolving and proliferation of debt instruments.

The report identifies a number of themes to watch for when understanding the further development of one of the world’s most important green financial markets:

Transition finance is becoming a prominent theme
A China sovereign green bond is expected
Carbon neutrality bonds expected to expand China’s green bond market and bring it closer to international green definitions
Sustainability linked-bonds to fuel transition finance.

“China’s market is playing a huge part in the green finance revolution that is unfolding,” says Sean Kidney, CEO, at CBI. “We have already seen incredibly positive steps in 2021 with China’s collaboration with Europe on a common ground taxonomy. This progressive attitude can help its green bond market emerge even stronger from last year’s pandemic.”

"Under the guidance of the carbon-peaking and carbon-neutral target, China's green bond market will move from a stage of rapid development to a new stage driven by both quality and quantity,” adds Yi Shi, deputy general manager of CCDC Research. “In 2020, China's green bond market slowed down due to the impact of Covid-19, but it is still one of the most promising markets in the world."

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