China Commits to Financing a Green(er) Economy

September 16, 2016

Earlier this month China and the United States jointly pledged to ratify the Paris climate change agreement, a monumental step for the world’s two largest polluting economies. Executing a dramatic reduction in greenhouse gas (GHG) emissions will require creative financing, and China is looking towards green bonds to support their commitment.

Green bonds are financial instruments that raise capital for specific projects with targeted environmental benefits. Apple made headlines in February of this year by issuing the largest green bond from a U.S. corporation. The tech giant sold $1.5 billion in green bonds earmarked for clean energy projects, green buildings, and resource conservation efforts.

Despite the large issuance from Apple, China has surpassed the United States as the largest issuer of green bonds. The country seeks to attract global investors to help finance the Chinese economy’s transition away from polluting industries and towards advanced technology and services.

China approved more than $17.4 billion of sales of green bonds so far this year — over 40% of the market — after issuing its first green bond less than two years ago. However, some of the domestic green bonds being issued do not meet international standards and require additional scrutiny by prospective investors.

For example, some of the Chinese green bonds are tagged to fund clean coal projects. While clean coal might represent environmental progress in pollution-afflicted China, internationally these bonds conflict with the majority of environmentally-friendly investment mandates, as well as the Green Bond Principles, which serve as the gold standard in green bonds.

China is currently responsible for over 20% of GHG emissions, closely trailed by the United States at just under 18%. As both countries seek financial support for their climate change commitments, investors must be wary of products that aren’t as green as they seem.

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

Related Content

04.11.2024

First to Cut: The Fed or the ECB?

Based on implied probabilities derived from options markets, investors are currently forecasting an 82% chance that the European Central Bank…

04.10.2024

1Q 2024 Market Insights Webinar

— LIVE WEBINAR APRIL 25 — Please join Marquette’s research team for our 1Q 2024…

04.01.2024

Sweet and High Up

Chocolate eggs and bunnies may have appeared more expensive to shoppers this Easter weekend, as the price of cocoa futures…

03.27.2024

The Crystal Ball Has Clouded

Last month, Marquette published a Chart of the Week that highlighted the aberrational length of the current…

03.21.2024

The Dynamic Duo

In 2023, investors were stunned by the robust performance of seven prominent mega-cap stocks deemed the “Magnificent Seven.” Largely beneficiaries…

03.12.2024

The DPI Lie?

There are multiple ways to gauge how private markets managers are performing, such as benchmarking returns relative to their peers…

More articles

Subscribe to Research Email Alerts

Research Email Alert Subscription

Research alerts keep you updated on our latest research publications. Simply enter your contact information, choose the research alerts you would like to receive and click Subscribe. Alerts will be sent as research is published.

We respect your privacy. We will never share or sell your information.

Thank You

We appreciate your interest in Marquette Associates.

If you have questions or need further information, please contact us directly and we will respond to your inquiry within 24 hours.

Contact Us >