Green Bond Market in China

Abstract

The Chinese Government wants to make a transition from its high-pollution and energy- intensive growth model towards a green and sustainable economy. It is estimated that the private sector must be the largest source of capital to fuel the green transition, contributing 85% to 90% of the investments. Green bonds have emerged as a tool to mobilise this capital. However, the green bond market (GBM) is a young and emerging market. Therefore, the aim of this research is to evaluate the governance structure of the Chinese GBM and to investigate whether any qualitative changes might be needed to improve the market. It attempts to answer the question: ‘To what extent is the GBM provided with a good governance structure?’. By using the evaluation criteria legitimacy, effectivity and resilience the governance structure is evaluated. The governance structure of the GBM does not meet the requirements of good governance as defined by Termeer et al. It can be stated that the governance arrangement still needs to develop, especially on the securitization of the environmental purpose of the GBM. The first step would be to harmonize the regulators’ guidelines with the international green bond principles and to establish sanctions for green washing. Another recommendation is to make the environmental impact report mandatory for green bonds projects. Only then it can be investigated whether the two-fold function of the GBM can be realised.