Chinese issuers are increasingly using the Common Ground Taxonomy (CGT) when launching green bonds, according to the China Foreign Exchange Trade System (CFETS). Updated in 2022, the CGT was originally developed through collaboration between China and the EU to harmonise green finance standards – covering carbon-intensive sectors including energy, manufacturing, construction, transportation, and forestry. Issues in China’s green bond market can attract more foreign investment by aligning with the CGT, but are only verified if 100% of funds are used for compliant projects. The CFETS said 325 CGT-aligned green bonds have been issued in the interbank market, as of 31 July 2024 – including 63 this year, compared to 53 last year. Of all CGT-aligned issuances, 244 are still outstanding, accounting for more than 22% of the interbank green bond market. CGT-aligned green bonds were mostly issued to raise funds for public transportation systems (31.2%), wind power generation (27.7%), and hydropower generation (20.9%). Almost 90% of the bonds are rated AAA. Several Chinese institutions have issued green bonds overseas using the taxonomy, which has also influenced green financial standards in other jurisdictions, such as Sri Lanka and Hong Kong. In addition, the report provided analysis of the issuance and trading of CGT-labelled green bonds, as well as their environmental impacts, such as significant reductions in carbon emissions and energy savings. CGT-labelled green bonds have also been integrated into indices, information dissemination channels, and green business repurchase agreements.
