China launched its green bond market at the end of 2016, and within six months, it was the world’s largest. Expectations were high that China would retain its leadership role, but it was toppled by an unlikely challenger – the United States.
Despite the Trump Administration’s lack of support for green development, the U.S. issuance of green bonds soared 120 percent in 2017 to reach $43.1 billion, according to Standard & Poor. In fact, the U.S. accounted for over a quarter of total green bond deliveries worldwide. This growth reflects a growing appetite by investors for sustainable projects. Green investment is transitioning in the United States from something previously viewed as “philanthropic” to something that is “profitmaking.”
By contrast, China’s total issuance of green bonds rose less than 1 percent over the previous year, to $23.1 billion. And China dropped its share of global issuances from 26 percent in 2016 to 15 percent last year. The Chinese government crackdown on corporate loans to limit “unproductive” investments has hit both green and regular bonds alike, which accounts in part for the drop. While it is likely that the green bond market in China will continue to grow as environmental sustainability is one of the top three priorities for the Chinese government, it will continue to be restrained by on-going careful scrutiny of corporate spending and investment.