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Aruba, May 7, 2014 - The term ‘sustainable financing’ has become synonymous with the funding of low-carbon initiatives. These ordinarily include renewable energy ventures, like solar and wind projects, and energy efficiency initiatives, like LED lighting and building retrofitting. Such industries are becoming increasingly important to China, as the nation consciously moves its economic base from manufacturing and heavy industry to higher value sectors, like clean technology and precision engineering. Supported by China’s recent push to mitigate climate change, the nation’s sustainable financing market is expected to grow exponentially during the forthcoming decade.
“China’s strive towards a cleaner economy coincides with growing demand for sustainable products,” says Wai-Shin Chan, Director of Climate Change Strategy, Asia Pacific, at HSBC. “Sustainable financing has the potential to play a critical part in China’s next phase of growth, as well as provide new opportunities for investors,” he adds.
Green bonds
In particular, the past few years have witnessed the emergence of green bonds – fixed income instruments that work in the same manner as conventional bonds, but where the proceeds are solely used for environmentally enhancing projects. To date, most interest in green bonds has taken place in Europe and North America, with global issuance reaching US$39.6 billion in 2014, according to the Climate Bonds Initiative. HSBC expects worldwide green bond issuance to top US$100 billion during this year.
Currently, demand for the asset class is driven by the need of Western institutional investors to include environmentally considerate investments in their portfolios. In addition, public sector bodies in Europe and the US are also issuing bonds to finance infrastructure projects in areas like water provision and waste management.