China Strengthens Dominance In Green Bond Market

China has taken the green bond market by storm since the broad bear market of 2022 and amplified its global lead in 2023, recent data from the Climate Bonds Initiative (CBI) shows.

With a total green bond issuance worth $131.3 billion (about ¥0.94 trillion) in both domestic and international markets, the country nearly doubled the second place, Germany, which issued roughly $67.5 billion during the year.

The milestone comes as the market recovered from a sharp drop in 2022 due to increasing interest rates around the world. According to data from S&P Global, total green bond issuances were up 10% year-over-year in 2023, totaling $575 billion, largely pushed by a rebound in Europe.

China saw a 3.5% YoY drop in volume compared to 2022. But the slump wasn’t nearly enough to counter the country’s massive leadership.

The US, first place in the global green bond market until 2021, now ranks third in the global ranking with a total of $58.3 billion issuance in the full year 2023, according to Climate Bonds Initiative data.

The UK, the fastest-growing country in the space, leapfrogged from seventh to fourth place in the year, issuing $32.6 billion in green bonds that adhered to CBI criteria.

2024 year-to-date numbers warn, however, that keeping the leadership could be more challenging than it seems for China this year. According to data from S&P Global, Q1 green bond sales in the country have slumped a massive 46%.

Nonetheless, experts say there’s a lot of untapped potential in the country, if only there were buying interest. “The issuance of green municipal bonds as a green financing mechanism is not being proactively pursued due to a lack of awareness and capacity to expand financial resources and instruments,” explains Liu Wenjie, senior analyst at Greenpeace in East Asia. Meanwhile, expectations are that the global green bond market will post solid YoY growth in 2024 on the back of subsiding interest rates. While record numbers are not expected until 2025, S&P Global sees green, social, sustainability, and sustainability-linked bonds accounting for 14% of the total debt issued in the year.