China overtook the US to lead a boom in global green-bond issuance in the first quarter, but analysts said it needs to do more to draw investors to help fund President Xi Jinping\u2019s estimated $21tn carbon neutrality pledge.
\nPending tasks include raising investor awareness of the environment, harmonising fragmented rules and tackling \u2018greenwashing\u2019, or issuers\u2019 efforts to inflate their green credentials, they said.
\nAt stake is Beijing\u2019s goal of net zero carbon emissions by 2060.
\nChinese issuers including banks, property developers, power generators and railway operators sold $15.7bn of bonds during January-March period to fund \u2018green\u2019 projects such as clean and renewable energy, according to Refinitiv data.
\nThe volume of such bonds, mostly yuan-denominated, almost quadrupled from a year earlier, the data showed.
\nThat exceeds the roughly $15bn of such bonds sold by US issuers in the first quarter, and helped drive a tripling of green bond issuance globally.
\nGreen bonds blossomed \u201clargely thanks to China\u2019s recovery from the coronavirus,\u201d said Nathan Chow, strategist at DBS. \u201cIn addition, the Chinese government is going all out to develop this market this year.\u201d
\nChina, the world\u2019s biggest emitter of carbon dioxide, needs 140tn yuan ($21.33tn) of debt financing over the next 40 years to meet its net-zero emissions target, investment bank China International Capital Corp (CICC) estimates.
\nWith roughly 800bn yuan of green bonds outstanding, China is already the world\u2019s second-biggest green bond market after the US.
\nHowever, green bonds account for less than 1% of China\u2019s $18tn bond market.
\nAt this stage, \u201ccompanies have no cost advantages issuing green bonds…and there\u2019s not enough market support for many green projects which take a long time to complete and are seen as risky,\u201d said CICC economist Zhou Zipeng.
\nHighlighting such headwinds, China\u2019s first batch of \u201ccarbon neutral\u201d bonds, launched in February, met tepid demand.
\nSeveral fund managers said green bonds are not yet on their investment radar.
\n\u201cThe only thing Chinese investors currently look at is yield. So obviously if green bonds cannot offer the extra returns, they ask the government, \u2018what can you do to help me?\u2019,\u201d said Ricco Zhang, Asia-Pacific director of the International Capital Market Association (ICMA).
\nA brokerage source said state-owned companies were motivated to issue green bonds to align with government priorities, but investors lacked incentives to buy them.
\nAuthorities are aware of the problems.
\nEarlier this month, Chinese central bank governor Yi Gang called for incentives to boost private participation in meeting Beijing\u2019s carbon goals.
\nMoving closer to international standards by excluding coal from the green market would widen the potential foreign investor base, Chow of DBS said.
\nICMA\u2019s Zhang said regulators also need to harmonise different domestic standards.
\nCurrently, China\u2019s central bank, securities regulator and the state planner have separate rules for green bonds issued under their supervision.
\n\u201cSometimes it\u2019s hard for international investors to have a granular understanding of different (Chinese) green bonds. This brings challenges for green investors to identify the right target for investment,\u201d he said.<\/p>\n","protected":false},"excerpt":{"rendered":"
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