Green bond supply will stagnate in 2017 with no repeat of Chinese expansion

 
Oliver Gill
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How do you define "green"? During the noughties, Italian steel plants were granted green subsidies for generating electricity using output gas from their furnaces (Source: Getty)

The rapid increase in green investment bonds will grind to a halt in 2017 as Chinese issuers abstain from providing bumper supply to the market.

The amount of green investment bonds issued globally in 2016 doubled to $90m, but such an increase will not be replicated this year, an HSBC research paper outlined.

Read more: Government comes under fire for Green Investment Bank sale

In fact, growth could completely stagnate: HSBC estimated between $90m and $120m will issued, according to reports by Reuters.

China drove the rapid expansion in green bonds last year, issuing 37 per cent of those supplied to the market. This compared with supplying just two per cent in 2015.

"Last year’s commencement of Chinese green bond supply was a one-off that cannot be repeated," the HSBC note outlined.

And with no government intervention in sight, HSBC concluded activity in the sector is likely to be more restrained this year.

Read more: Green bonds could provide sustainable funding for long-term investments

The paper concluded governments are reluctant to get involved in increasing green bond issuance, even though it represents a mere fraction of overall global bond supply, because if a widely held expectations of steady growth over the medium term.

Another issue raised by the paper was that there is no precise commonly agreed definition of what constitutes a green investment.

"If green quality standards remain high, then we expect that in time, policy practitioners may then step in and help further to accelerate market growth."

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