China is now looking beyond its domestic market to continue the expansion of green bonds. It’s doing this because the country will need an estimated 3-4 trillion yuan in green investments annually in the coming years – meanwhile, international investors have shown a keen interest in green assets: 38% of European investment officers polled in June 2017 said they were in the market for green bonds, 50% said they were interested in renewables.
More access may sound like a good thing, but foreign investors still don’t understand enough about the Chinese green bond market when it comes to different bond categories, proceeds regulations, pre-issue verification and audits. They also don’t know how to find information in these areas.
The good news is that the Green Finance Committee of China is working with the European Investment Bank to harmonise green bond standards between Europe and China. This will give investors the chance to apply their existing knowledge to a foreign market. The first step was completed in November, providing a framework for compatibility between the standards, and allowing investors to make a direct comparison.