Roadmap for China: Using green securitisation, tax incentives and credit enhancements to scale green bonds

China requires an annual investment of RMB 2-4 trillion (USD 320-640 billion) to address environmental and climate issues, with the private sector expected to provide 85% to 90% of this capital. While green bonds are a key vehicle for this, the market faces hurdles including the small scale of individual green projects and low credit ratings for non-state-owned corporate issuers. The report proposes green securitisation as a primary aggregation tool to bundle small assets into larger, investable securities and to detach project risk from the issuer's balance sheet. It further recommends the development of standardised green loan contracts and the establishment of financial warehouses to support this process. Additionally, the paper advocates for tax incentives to reduce funding costs and public credit enhancements, such as guarantees and subordinated debt, to improve the risk-return profile of green bonds for institutional investors.

• China's environmental and climate transition requires an annual investment of at least RMB 2-4 trillion (USD 320-640 billion), where public funds are expected to contribute only 10% to 15% and the private sector 85% to 90%.
• Small-scale green projects struggle to raise capital because they fall below the minimum issuance sizes typically required by institutional investors, which are USD 200 million or more in mature markets and at least USD 100 million in emerging markets like China.
• Non-state-owned smaller corporates in China often face barriers to attracting institutional investors due to low credit ratings or unrated status, making it difficult to issue investment-grade green bonds.
• Green securitisation can overcome issuer-level credit challenges by detaching the green assets from the originator's balance sheet, allowing the bond's rating to be based on project risk rather than the issuer's general credit rating.
• To scale green securitisation, the report recommends three public sector actions: supporting the development of standardised green loan contracts, encouraging the uptake of these contracts, and establishing financial warehouses to aggregate loans across different originating entities.
• Tax incentives are proposed as a cost-effective way to reduce funding costs for green projects; the PBoC estimates such incentives could reduce funding costs by 100 basis points, potentially a 20% reduction based on a 5% interest rate.
• Public credit enhancements, including guarantees, subordinated debt, and insurance, are recommended to improve the risk-return profile of green bonds, particularly for asset-backed securities where historical data is limited.

APA

(Lily), W. D., Kidney, S., & Sonerud, B. (2016). Roadmap for China: Using green securitisation, tax incentives and credit enhancements to scale green bonds. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/greening-securitisation-tax-incentives-credit-enhancements-green-bonds-en.pdf

Chicago

(Lily), Weihui Dai, Sean Kidney, and Beate Sonerud. Roadmap for China: Using green securitisation, tax incentives and credit enhancements to scale green bonds. International Institute for Sustainable Development, 2016. https://www.iisd.org/system/files/publications/greening-securitisation-tax-incentives-credit-enhancements-green-bonds-en.pdf.

Wikipedia

{{cite report |last1=(Lily) |first1=Weihui Dai |last2=Kidney |first2=Sean |last3=Sonerud |first3=Beate |title=Roadmap for China: Using green securitisation, tax incentives and credit enhancements to scale green bonds |publisher=International Institute for Sustainable Development |date=April 2016 |url=https://www.iisd.org/system/files/publications/greening-securitisation-tax-incentives-credit-enhancements-green-bonds-en.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{lily2016roadmap, author = {(Lily), Weihui Dai and Kidney, Sean and Sonerud, Beate}, title = {{Roadmap for China: Using green securitisation, tax incentives and credit enhancements to scale green bonds}}, institution = {International Institute for Sustainable Development}, year = {2016}, month = apr, url = {https://www.iisd.org/system/files/publications/greening-securitisation-tax-incentives-credit-enhancements-green-bonds-en.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }