Fund managers are increasingly grappling with fragmented policies in China’s $113 billion green bond market that can make it hard to assess just how much of that money is going to projects to help the environment.
The country aims to be carbon neutral by 2060, a push that’s fueled a 248% jump in sales of green notes locally and offshore this year to $23 billion, a record for this point in a year. That leaves the total outstanding amount the second highest globally after France.
But only about half or less of Chinese green securities meet global standards for what counts as green, according to Xie Wenhong, China program manager at Climate Bonds Initiative. The international not-for-profit organization publishes screening standards for green debt that are followed by many investors.
Guidelines set by China’s National Development and Reform Commission, the top economic planning body, allow as much as 50% of green bond proceeds to be used to repay bank loans and replenish working capital. This contrasts with CBI’s methodology, which requires full allocation to green projects. Green Bond Principles from International Capital Market Association also require all proceeds of green bonds to be dedicated toward green projects.