Impact of regulatory policies on green bond issuances in China: policy lessons from a top-down approach

ABSTRACT

This study examines whether the green bond policies of major Chinese financial regulators’ have a direct and positive impact on the green bond market. Using Chinese green bond issuances from 2012 to 2019, we analyze green bond issuer response to top-down regulatory policies post 2014. Using a difference-in-difference model, we find a direct positive influence of green bond regulatory policies on issuance amounts. Additional analysis shows that specific issuer characteristics like ownership type (government-owned), industry type (green industry), and sector type (financial issuer) have a stronger positive reaction to policy announcements and led to the issuance of more green bonds. Our results highlight the supporting role of financial regulators in advancing the green finance agenda in China.

Key policy insights

• Green bond policies implemented by Chinese financial market regulators have been an effective means to increase overall green bond issuances

• Certain issuer types react more positively by increasing their green bond issuances following the announcement of green bond policies

• Pro-active participation by key financial regulators in the form of harmonized definitions, consistent engagement, and alignment with international best practices can be beneficial for stimulating green finance growth

KEYWORDS:

• Green bonds
• China
• top-down approach
• regulatory policies
• issuer characteristics

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 https://www.wind.com.cn/en/edb.html

2 https://www.chinabond.com.cn/

3 http://greenfinance.xinhua08.com/zt/database/

4 https://www.ndrc.gov.cn/fggz/hjyzy/stwmjs/201903/t20190305_1220625.html

5 https://ukcop26.org/cop26-goals/finance/