On April 2, China’s Ministry of Finance (MoF) issued its inaugural RMB-denominated sovereign green bond in London with an issue size of 6 billion yuan (approximately US$833 million)[1], a landmark move that underscores the Chinese central government’s leadership in strengthening the role of the overseas green bond market for achieving its dual carbon goals – peaking carbon emissions by 2030 and achieving carbon neutrality by 2060.
The issuance was a very prompt action shortly after the release of a Framework for Sovereign Green Bonds (hereinafter referred to as “the Framework”) by MoF on 20 February 2025. The Framework is in line with the China Green Bond Principles (2022 Edition) and the International Capital Markets Association (ICMA) Green Bond Principles (2021 Edition)[2]. This Framework lays the foundation for China to issue offshore sovereign green bonds and aims to diversify high-quality green bond products globally and attract international capital to support China’s domestic green and low-carbon development.
Purpose of the Framework
The Framework is designed to raise capital exclusively for environmentally sustainable projects included in China’s central fiscal budget, contributing to the achievement of one or more environmental objectives, including climate change mitigation and adaptation. The aim is to attract international funds to support China’s green development as well as transition towards a low-carbon and climate resilient economy through enriching the range of high-quality green bonds products in the global market.
Four Core Components of the Framework
The Framework sets out four core components for the issuance of eligible green bonds:
i) Use of Proceeds
Only six eligible green categories listed below will be financed or refinanced under the Framework:
- Clean Transportation
- Sustainable Water and Wastewater Management
- Environmentally Sustainable Management and Restoration of Living Natural Resources and Land Use
- Marine Ecosystem Protection and Restoration
- Pollution Prevention and Control
- Resource Utilization and Recycling
The proceeds raised by the sovereign green bonds issued under the Framework will be fully in line with green expenditures from MoF’s fiscal budget, including direct project investments, project operating expenditures, capital transfers from the Central Government to Local Governments, and tax rebates.
ii) Process for Project Evaluation and Selection
MoF is responsible for evaluating and screening the green projects and will establish a Green Expenditures List. Based on evaluation results, MoF will determine the allocation of proceeds in accordance with China’s environmental policies and the Framework’s requirements. After issuance, MoF will prepare annual information disclosures and periodically review the Green Expenditures of the outstanding bonds to ensure that the use of proceeds is fully compliant with the Framework’s requirements.
iii) Management of Proceeds
MoF will track the allocation of the proceeds to the Green Expenditure through maintaining an internal register system. The temporarily unallocated proceeds will be managed in accordance with MoF’s treasury funds use and will not be invested in any fossil fuel related assets or highly polluting, energy intensive assets or projects. The Framework clearly states that all proceeds from sovereign green bonds will be fully allocated to Green Expenditures in the year of bond issuance (the “Current Fiscal Year”), the next fiscal year and up to three previous fiscal years. At least 50 percent of the proceeds will be allocated to Green Expenditures in the current and next fiscal year.
iv) Information Disclosure/Reporting
MoF will annually publish the use of proceeds on its official website until full allocations as well as on a timely basis in case of any material development of the projects, including both the proceeds allocation and the environmental impact.
External Reviews – Second Party Opinion and Third-Party Verification
Two independent external reviewers, Lianhe Green Development Co., Ltd. and DNV Business Assurance Limited, have provided the Second Opinion on the green credentials of the Framework.
To enhance the credibility of the green bond market, an independent third-party institution will be engaged by MoF for conducting an external verification on the annual Sovereign Green Bond Information Disclosure in order to provide transparency and further strengthen the credibility of the market.
Paving the Way
Looking at the global capital market, around $380 billion of sovereign issuance has been underwritten from G20 countries, led by France, Germany and the UK with more than $70 billion raised each[3]. This Framework paves the way for China to enter the market now. Under this Framework, central and local governments, state-owned enterprises, and other eligible institutions will be able to raise funds for green projects included in China’s central fiscal budget. With high transparency and standardization features, green sovereign bonds can connect to international green financial standards and reduce cross-border investment barriers. This will not only attract long-term capital from sovereign wealth or pension funds to flow into China’s green sectors but also provide more diversified and sustainable investment opportunities for global responsible investors.
Offshore Green Debut
This is China’s first green sovereign bond issued overseas, and the plan for this debut was first announced during the 2025 UK-China Economic and Financial Dialogue in Beijing. The deal was split into two tranches: a 3-billion-yuan bond with a three-year term at an interest rate of 1.88 percent and a 3-billion-yuan bond with a five-year term at an interest rate of 1.93 percent, with total subscriptions hitting 41.58 billion yuan, 6.9 times the issuance value. This landmark issuance not only fills the gap in RMB green bond yields and provides a key benchmark yield reference for the market but also sets an international standard for Chinese enterprises seeking to issue offshore green bonds.
One working paper from the International Monetary Fund (IMF) shows the catalytic effect of the sovereign debut on the corporate green bond market that can have quantitative and qualitative benefits for the development of private sustainable bond markets. The results of the IMF working paper find that both the number and the size of corporate green bond issuance increase more in a jurisdiction after the sovereign debut, promoting best practice in terms of green verification and reporting to induce corporate issuers to follow suit. The paper finds that the results are more pronounced in countries with stronger climate policies[4].
[1] China issues first overseas RMB-denominated sovereign green bond in London.
[2] Press Office | Ministry of Finance
[3] China plans debut sovereign green bond in 2025 | Environmental Finance
[4] IMF Working Paper | Sovereign Green Bonds: A Catalyst for Sustainable Debt Market Development?
