April 2025 – Peter Deeney

By Greg Ritchie China is preparing to launch its debut sovereign green bond at a time when the market is stuttering elsewhere, especially in the US where corporate deals have almost ground to a halt. Green bonds, which raise funds for environmentally-friendly projects, are perhaps finance’s most well-known product designed to accelerate the world’s climate transition. Global issuance mushroomed to around $700 billion last year, from just $41 billion a decade ago. Yet at the start of 2025, pockets of the market are showing signs of a slowdown. Issuances of green bonds from emerging economies, excluding China, have fallen by about a third to $8 billion in 2025, the slowest start to a year since 2022. Asia Pacific was the only region to see green bond issuance grow, up by around 23% compared to 2024, with a large portion of that coming from Chinese issuance, according to BloombergNEF.“The pullback is likely a result of the increased macroeconomic and geopolitical uncertainty issuers are facing, with persistently high interest rates, rising protectionism and the threat of potential trade wars,” said Jameson McLennan, a research analyst at BNEF.The development is also being tied to a broader US retreat – from the White House to Wall Street – when it comes to climate finance under President Donald Trump. Case in point: Only one US dollar green bond from an American firm has hit the market in 2025, a $350 million note from Oglethorpe Power in January.In that context, it’s no coincidence that China has chosen to list its debut green bond in London, given European investors’ continued strong demand for environmental products. A foreign listing also supports China’s ambition of taking a greater role in global climate diplomacy, where the US’s retreat creates space for new alliances.China’s deal is particularly significant given “European investors’ strong appetite for responsible and green investments and amid global uncertainty in emissions reduction, such as the US withdrawal from the Paris Agreement,” said Sonali Siriwardena, global head of ESG at law firm Simmons & Simmons. It could “provide fresh impetus to the global green transition.” In the first month of his second term, President Trump pulled the US out of the Paris Agreement, froze funding for green projects, fired staff from agencies that do climate work and targeted agencies’ climate-related programs. That’s fanned Republican leaders’ attacks on investments that try to achieve environmental goals such as cutting emissions.To be sure, it’s still early in the year and US green bond sales may pick up. What’s more, many firms are still funding projects in the US to improve their efficiency and meet other environmental goals. They’re just doing so outside the green bond market as they look to keep quiet about their climate goals and achievements. “Some US issuers simply don’t want to flag their green investments,” said Johann Plé, a senior portfolio manager at AXA IM.

A lot of green$830 millionThis is how much China’s government seeks to raise (6 billion yuan) from its inaugural sale of green bonds.

Stepping up”This is a positive move by China. A clear signal to the market that China intends to stay committed to the green transition agenda despite the US backtracking.”Rose ChoyResearch director for Asia Pacific at the nonprofit Anthropocene Fixed Income Institute