The bonds, focused on green projects, can help programmes in developing countries secure lower-cost financing, but competition and sustaining interest remain challenge.
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Works being undertaken to upgrade the Budapest-Belgrade railway in Hungary, a project funded by China’s Belt and Road Initiative (BRI). China is now using green bonds and newly launched sustainability bonds to leverage private capital in support of development in BRI states (Image: Zheng Huansong / Imago / Alamy)
In June this year, the Bank of China (BOC) issued the first sustainable development bonds for which all funds raised are directed towards countries affiliated with the Belt and Road Initiative (BRI), according to the bank’s website. The bonds totalled USD 940 million and were issued simultaneously through BOC branches in Macau, Hungary and Panama, in US dollars and yuan.
Sustainable development bonds, or sustainability bonds, are issued to finance a combination of both green and social projects, often simultaneously. Banks typically use the raised money to provide loans for sustainability projects. Meanwhile, “green” bonds raise financing for eco-friendly projects such as renewable power stations and green transport schemes, and “social” bonds support projects with positive social impacts.
The release of the sustainability bonds is the latest example of Chinese financial institutions’ support for green Belt and Road investment, experts have told Dialogue Earth. Demand for financing that spurs green development has been growing for several years in developing countries, and China is now using green bonds and these new sustainability bonds to leverage private capital in support of “high-quality development” within BRI partner countries.
China was the world’s largest issuing market for green bonds in both 2022 and 2023, according to the 2023 Green Bond Report from the Climate Bonds Initiative (CBI), a non-profit seeking to mobilise global capital for climate action. In 2023, China’s issuances of green bonds abroad were in the range of USD 10 billion, or 10.9% of its annual total. This suggests that, compared to domestic issuance levels, there is still room for growth.
