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Report outlines key recommendations on how to grow a green bonds market in China

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The Climate Bonds Initiative and IISD have launched a report – Growing a green bonds market in China: key recommendations for policymakers in the context of China’s changing financial landscape. 

The action-oriented paper was undertaken in conjunction with the Financial Research Institute of the Development Research Center of the State Council (DRC-FRI). It is accompanied by a much awaited five-step “how to guide” for green bond issuers in China. Available in English and Chinese. The reports are anchored in the Chinese context, evaluating the current state of play of China’s bond markets and how the short-medium term financial reforms may provide an opportunity for green bonds to emerge. They provide a range of specific, action-oriented recommendations for China’s policymakers on how to grow a green bonds market in China. These policy options are gaining traction amongst top policymakers in China: many of them are included in recent policy agenda drafts from People's Bank of China.

The reports complement the synthesis paper on Greening China’s Financial System launched at the China Development Forum on Saturday, by offering more detailed recommendations specific to green bonds.

Sean Kidney, CEO of the Climate Bonds Initiative and the co-author of the report, says: “The substantial commitments China has made to reform its bond markets are exciting from a financial and economic perspective, but also from an environmental one, as they increase the opportunity to utilise the bond market to finance the transition to a low-carbon/green economy in China.

‘Policymakers can consider how to facilitate green bonds in the initial design of the market. Pushing ongoing changes in a green direction is much easier than attempting changes to established systems. First, though, this requires exploring what investments will be defined as “green” in China’s green bond market.’

Beate Sonerud, Policy Analyst at the Climate Bonds Initiative, says: ‘China is grappling with environmental challenges that are very different to those of the mature economies in Europe and the US where the green bond market has been largely climate change focused. While climate change is high on the agenda in China too, the green challenge here is much broader: the extreme levels of air pollution, contaminated soil and lack of clean water makes this very clear.’

Kidney adds: ‘The excellent opportunity to integrate green bond market development with ongoing debt capital market reform is ripe in many emerging markets beyond China. Country-specific policy guides for green bonds can assist policymakers that are currently reforming their debt capital markets on how to take advantage of the excellent opportunity to design the bond market for green bonds from day one.’ 

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