China is embracing green bonds as part of its efforts to combat the country’s notorious pollution problems.
China Securities Regulatory Commission (CSRC), the main regulator of the securities industry in China, released a new set of guidelines to support the issuance of green bonds on March 2, 2017.
Promoting green bonds could be considered the latest in the government’s efforts aimed at promoting environmental protection and to reduce the effects of pollution as a result of its rapid industrial growth over the past decades.
China has the world’s largest green bond market, with more than RMB 200 billion (30.3 billion USD) worth of green bonds issued in 2016 alone, nearly 40% of green bonds issued globally that year.
Policymakers are providing financial support and governmental incentives for green bonds issuers in order to attract foreign investors and encourage CSR related projects. The Climate Bonds Initiative (CBI) estimates that the annual issuance of green bonds rose from RMB 21 billion (3.2 billion USD) in 2012 to RMB 559 billion (84.5 billion USD) in 2016.
The policy support and market growth provides foreign investors and businesses operating in China with a wide range of opportunities: foreign investors can profit the support of a state-run program, while China-based businesses can fund eco-friendly projects with relative ease.
The Chinese government has been making efforts to attract green investors and support green projects at a time when many companies are increasingly taking action to combat climate change. A deeper understanding and holistic approach is required to face this issue; a different approach that can bring tax incentives and government support, as well as added competitive advantage.
Chinese citizens are showing a strong interest in energy-saving and eco-friendly solutions. Companies that will address such interests will not just only be rewarded by the government and potential investors, but by a fast-growing green market.
Tax incentives, funding opportunities, government support, and the high demand for these kind of products and services create the right scenario for successful business. Although entering the Chinese market requires a detailed business plan, the range of incentives offered by the government for green projects and responsible companies make investments in China worthwhile.