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Green Capital Markets

The world will need $100 trillion of new sustainable infrastructure by 2030. Approximately two-thirds of the new infrastructure will be needed in Asia.  We need to find efficient channels to ensure capital can be provided to support green/sustainable financing. We see rapid growth in the capital market space – evidence by the continued stats from green bonds issuance. Global green bond issuance reached $167.3bn in 2018 and surpassed 2017 volume of $162.1bn by 3%.  China is one of three countries for labelled green bond issuance. Top sectors for green bond issuance are: Multi-sector ($179bn), Energy ($90bn) and Buildings ($70bn). This trends will continue.

However, we must recognise that almost 80% of all sustainable debt globally is issued in the form of bank loans. Bank balance sheets are unlikely to be able to accommodate the new loan assets.

Hence, the development of a broader securitisation market to move sustainable loan assets into the debt capital markets dominated by long term institutional investors is a desirable initiative.

Currently, there are $1.2 trillion of sustainable loans on the balance sheets of Chinese banks. Moving green loans into the debt capital markets has been an on-going area of work between China and the UK via the G20 and EFD. The UK and China have been partnering to identify barriers to the development of the green securitisation market in China.

Projects

CBI China Green Bond Market Development Programme

Climate Bonds Initiative (CBI), with support from the UK FCO and the British Embassy Beijing, has been working on several initiatives to expand the availability and use of green bonds in China, through policy guidance, development of standards and certifications on green bonds, and data and market analysis.

More information on CBI can be found here.

China Green Bonds: Effective Implementation; Economic Impacts

Climate Policy Initiative (CPI) seeks to increase the understanding of green finance in China given the unique dynamics of China’s financial and governance systems – contributing to the capacities of Chinese regulators and investors to ensure system effectiveness. The project focusses on the quality and effectiveness of China’s green bond market, its financial and economic impacts, as well as the risk disclosure, metrics and management.

More information on CPI can be found here.