What’s Next for China’s Green & Sustainable Market?

To date, financial Institutions and limited sectors have been actively participating in China’s Green Bond Market, but are others ready to participate?

Olivier Ménard, Head of the Green & Sustainable Hub for Asia Pacific at Natixis CIB, shared his views.

Continuous Expansion to Come

From discussions we are having with issuers and borrowers, we see that that the green bond market will (soon) expand outside of its current scope – i.e., primarily renewable energy, low carbon transport at present – and we see companies in high emitting industries in China, such as steel, metal & mining, cement, petrochemicals etc.,  sincerely approaching their own energy transition and decarbonization drivers, which will allow them to be actors in the green bond market, and one day the sustainability linked markets.

Some issuers are already sophisticated, while others are taking their first steps in the space. Regardless of their experience, we are able to support them as they embark on their journeys, working to help define their sustainability strategies and embed those strategies into their funding strategies.
 

Harmonization of Credentials and Integrity

Appetite for China’s green bond market is becoming increasingly global. For international investors to increase their participation into this market and to make China’s transition a success, investors need to be see an alignment/convergence of green credentials i.e. transparency requirements, disclosure, proper reporting and verifications.

We as banks and financial institutions clearly play a role in this, as we are advising our clients in the structuring of their sustainable financings. This goes hand in hand with the role that other actors of the sustainable finance ecosystem (investors, second party opinion providers, verifiers, regulators…) play.
 

The Importance of a Common Ground Taxonomy

With a growing number of sustainable finance taxonomies across various economies, and with the EU and China taxonomies being so far the two most important in the world today, the EU-China Common Ground Taxonomy will be fundamentally important. It should allow for more interoperability among the taxonomies, and ultimately allow investors to fluidly invest in both directions – Chinese investors in Europe and European/international investors in China. 
 

Net Zero Commitments

Commitments to achieving net zero are important – but not enough alone. Companies need to define a pathway and a science-based trajectory, and they need access to accurate ESG data.

There remains a lot of work to do, particularly building awareness, but with the market developments underway, there is a sincere willingness to make this happen – the outlook is optimistic.

Natixis CIB co-sponsored the 2022 Green Bond China Investor Survey from Climate Bond’s Initiative.
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