Green funding in China shrinks due to the economic pressure of the coronavirus pandemic

Green funding in China is slowing down significantly because of pressure from the coronavirus, which jeopardizes the world’s second-largest clean-up economy target.

Only one green loan deal was signed in China this year, while green bond issuance marks its slowest start since 2017. The main reason for this is a shift in corporate focus from environmental protection and cleaner air to combating the impact of COVID-19.

This type of debt is used to finance environmental projects, including renewable energy facilities.

Green loans have gained popularity in recent years in China, rising to an eight-year high from 306 million USD in 2017 to 1.8 billion USD in 2019, which includes local currency loans.

Along with the boom in green bond issuance, this type of financing is a key tool in reducing China’s dependence on highly polluting fossil fuels and implementing President Jinping’s ambitious environmental policy.

Funding for green projects – the driving force behind the search for green loans or bonds – has been almost paused as borrowers focus on efforts to keep part of their income in a pandemic. Companies can benefit from Beijing’s quick approval to sell so-called “anti-epidemic bonds”, which are aimed at alleviating liquidity for companies affected by the virus.

Green financing in Taiwan and Hong Kong remain more sustainable. Taiwanese companies have signed contracts for green loans equivalent to 3.2 billion USD, while Hong Kong companies have taken green loans of 355 million USD in the first three months of 2020.

Hong Kong-based Swire Properties Ltd continues to rely on green loans this year, despite the current crisis. The company said it converted 2 billion USD of existing conventional loans into sustainability-related loans in the first two months of 2020.

Fanny Lung, CFO at Swire Properties, said she did not expect disruption to the company’s ambitions for sustainability due to the virus. “We are committed to continuing our sustainable development and green finance initiatives, despite the short-term challenges in the global economy,” said Leung.

The parent company of Swire Pacific Ltd. reported the sharpest drop in its profits since the Asian financial crisis earlier this month.

Chinese banks are at the forefront of this initiative, with many of them issuing green, sustainable loans, and energy-related loans.