Significant funding will be needed to build new environmentally friendly infrastructure

Developing a market for green bonds could help China open up its financial system, reduce pollution and speed up its transition towards a low-carbon economy, according to Spencer Lake, Global Head of Capital Financing, HSBC.

Mr Lake said: “Over the last three years the international green bond market has grown more than ten-fold from USD3 billion to USD37 billion. It is predicted that new issuance will triple again in 2015, reaching USD100 billion of outstanding stock. This money is funding projects such as sustainable transport, solar panels and water conservation around the world, including here in China.”

Mr Lake was speaking at the signing of a Memorandum of Understanding to establish a new discussion forum on green bonds, bringing together the public and private sectors to help the Beijing city government develop new forms of sustainable finance.  The forum is the first of its kind established in China. HSBC is the first foreign bank invited to join.

Over the last three years the international green bond market has grown more than ten-fold from USD3 billion to USD37 billion

The Chinese government’s decision to focus on the quality as well as the quantity of economic growth means significant funding will be needed to build new environmentally friendly infrastructure such as renewable power plants, Mr Lake said.

China has already started its journey to a lower-carbon, energy-efficient economy, with investment in clean energy reaching nearly USD90 billion in 2014. But USD2.8 trillion of investment in key green sectors will be needed by 2020 for the country to meet its ambitions, according to a report from China’s Development Research Centre of the State Council, a governmental advisory body.

Mr Lake said municipal green bonds issued by local or regional governments have significant promise: “They provide the long-term stability that investors such as pension funds and insurers look for, and financing for key infrastructure projects that administrations need. With a significant pool of domestic savings seeking new investment opportunities, the potential for the green bond market in China is vast.”

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