China has taken the green bond market by storm since a broad bear market in 2022, widening its global lead in 2023, according to the latest data from the Climate Bonds Initiative (CBI).
The total amount of green bonds issued in domestic and international markets combined was $131.3 billion (about 94 trillion yen), almost double that of second-place Germany, which had annual issuance of about $67.5 billion.
The milestone comes as the market recovers from a steep sell-off in 2022 as interest rates rise globally. Total green bond issuance in 2023 is expected to rise 10% from the previous year to $575 billion, driven mainly by a recovery in Europe, according to data from S&P Global.
China saw a 3.5% year-on-year decline compared to 2022. However, this drop was not enough to challenge the country's enormous leadership.
The United States, which led the global green bond market until 2021, is now ranked third globally with total issuance of $58.3 billion for the full year of 2023, according to data from the Climate Bonds Initiative.
The UK, the fastest growing country in the sector, has issued $32.6 billion in green bonds complying with CBI standards, jumping from seventh to fourth place this year.
But the numbers so far in 2024 warn that maintaining leadership this year may be harder than it seems for China: The country's green bond sales fell a massive 46% in the first quarter, according to data from S&P Global.
Still, experts say the country has a lot of untapped potential, if only there were buyers. “The issuance of green municipal bonds as a green financing mechanism has not been actively pursued due to a lack of awareness and the ability to expand financial resources and means,” explains Liu Wenjie, senior analyst for East Asia at Greenpeace. Meanwhile, the global green bond market is expected to see robust year-on-year growth in 2024 on the back of declining interest rates. While record figures are not expected until 2025, S&P Global expects green, social, sustainability and sustainability-linked bonds to account for 14% of all bonds issued that year.
