Expanding Green Finance in Asia

Photo from HKGFA

Read the Chinese version here.

On November 4, 2025, a landmark workshop was hosted in Hong Kong to explore the growth potential and challenges of the GSS+ bond market, specifically Dim Sum, Panda, and Free Trade Zone (FTZ) bonds. The event, co-hosted by Hong Kong Green Finance Association (HKGFA), China International Capital Corporation (CICC), CGS International Holdings Limited (CGS International) and Lianhe Green Development, and supported by Climate Bonds Initiative and Green Development Institute (GDI), brought together policymakers, financial institutions, development banks, and rating agencies to discuss strategic approaches to boosting Hong Kong’s role as a global sustainable finance hub and improving cross-border financing for sustainable development projects, particularly for Global South countries.

The workshop’s primary goals were to address key market bottlenecks, explore ways to improve liquidity, and identify strategies to scale financing for issuers in emerging markets through innovative de-risking and guarantee mechanisms. Here’s a detailed summary of the key discussions, insights, and outcomes shared by the prominent speakers at the event.

Dr. Ma Jun (Chairman and President, HKGFA) – Opening Remarks: China’s Role in Climate Finance Mobilisation

Dr. Ma Jun opened the workshop by highlighting the urgent need for China to play a more prominent role in addressing the global climate finance gap, especially for developing countries. He pointed out that while OECD commitments to climate finance have fallen short, China has a unique opportunity to lead global efforts to finance climate action, particularly through RMB-denominated instruments such as Panda, Dim Sum, and FTZ bonds. These bonds offer cost advantage compared to USD-denominated bonds, even after considering hedging costs, under the current global interest environment. Leveraging these RMB instruments can help expanding financing channels for countries involved in the Belt and Road Initiative (BRI) and other developing nations, enabling them to access lower-cost capital, including funding for green and sustainable projects.

Dr. Ma also identified several challenges in promoting these RMB financing options: the awareness gap among Global South issuers regarding available RMB financing channels, liquidity constraints in Hong Kong’s offshore RMB market, and the lack of risk mitigation tools, such as credit guarantees. He proposed mobilizing onshore RMB liquidity to improve market conditions and recommended that multilateral development banks (MDBs) like AIIB, ADB, and the World Bank step in to offer partial guarantees to help reduce risks for emerging market issuers. Capacity building and joint marketing efforts were also highlighted as essential to raising awareness among issuers and increasing participation in the GSS+ bond market.

Liang Dongqing (Member, Management Committee, CICC) – Hong Kong’s Strategic Advantage in Global Sustainable Finance Market

Liang Dongqing pointed to Hong Kong’s strong financial infrastructure and seamless integration with mainland China’s capital markets, which allow it to act as a key player in green bond issuance and sustainable finance across Asia and globally. Liang highlighted Hong Kong's Sustainable Finance Taxonomy and ESG disclosure standards as important steps toward improving transparency and aligning with international green finance practices.

Liang noted that policy coordination between Hong Kong and mainland China is crucial to unlocking the full potential of the green bond market. She stressed the need for continuous market innovation and taxonomy alignment to drive broader market participation and ensure sustained growth in green finance initiatives.

Loran Chen (CGS International Holdings Limited, CGSI) – White Paper Presentation: Enhancing Hong Kong’s GSS+ Bond Market

Loran Chen presented the White Paper co-authored by CGS International, CICC, Lianhe Green, and supported by HKGFA, offering a comprehensive overview of Hong Kong’s GSS+ bond market. She noted that Hong Kong accounted for 45% of Asia’s green bond issuance in 2024, positioning it as a regional leader. However, despite this leadership, the market faces significant challenges such as fragmented green standards, limited liquidity, and higher bid-ask spreads than global markets.

To address these challenges, the white paper recommended several short-term, medium-term, and long-term strategies. In the short term, the paper advocated for product innovation based on standardised ESG scoring, the adoption of Common Ground Taxonomy (CGT), and policy incentives such as issuance fee subsidies. In the medium term, it emphasised the need to improve disclosure standards, enhance cross-border connectivity through Bond Connect, and create a GSS bond task force to engage potential issuers. Long-term goals included integrating fintech and carbon-linked pricing into green bond structures to further scale the market. The White Paper outlined actionable steps to make the GSS+ bond market more efficient and transparent, ensuring that Hong Kong maintains its leadership in sustainable finance.

Dafei Huang (Executive Director, CICC) – Innovations in Green Finance: Market Case Studies

Dafei Huang shared several real-world case studies that showcase the application of innovation in China’s green bond markets, demonstrating how these innovations can drive growth in both mainland China and Hong Kong. One example was the CGT-ESG Bond Portfolio, a US$4 million portfolio co-structured by CICC and CGS International, which applies CGT and ESG metrics to green U.S. dollar bonds issued in Hong Kong. Another example was the Sustainable Transition Bond Basket launched by CICC in China’s interbank market, with a basket size of ¥30 million, which focuses on carbon reduction and achieves approximately 18,000 tons of indirect CO₂ reduction annually.

Huang noted that carbon reduction-focused bond portfolios are helping increase the attractiveness and liquidity of green bonds, especially in China’s interbank market. The relatively lower bid-ask spreads in mainland China, compared to Hong Kong’s market, represent an opportunity for Hong Kong to learn from China’s market and enhance its own liquidity. Huang emphasised that such innovative finance products play a critical role in increasing market participation and driving long-term growth in the sustainable bond sector.

Mr. Xing Yong (Director, Shanghai Municipal Financial Bureau) – FTZ Bond Market Update

Mr. Xing Yong provided an update on the Shanghai Free Trade Zone (FTZ) bond market, which is undergoing significant expansion with the newly introduced policy framework for offshore RMB bond issuance. He emphasised that Shanghai’s FTZ is now more open and flexible, offering new opportunities for green bond issuers. The principle that "both issuers and investors should be mainly offshore”, including in Hong Kong and other Belt and Road countries, aims to tap into a larger pool of overseas investors. Xing also announced that FTZ bonds will be allowed to trade on offshore platforms like the HKEX, improving market liquidity and accessibility, embedding great potential for dual listings and co-marketing between Shanghai and Hong Kong to expand the FTZ bond market and boost market liquidity. Meanwhile, Shanghai is exploring policy incentives and subsidies for green FTZ bond issuance, which would further incentivise market participation. These developments position Shanghai FTZ as a growing player in the global sustainable bond market.

Wenhong Xie (Head of China Programme, Climate Bonds) – Sustainable RMB Bond Market Overview

Wenhong Xie provided a comprehensive overview of the Dim Sum, Panda, and FTZ sustainable bond markets, focusing on their growth and potential for issuers in emerging economies. He highlighted that Dim Sum bonds are the largest and most active, with RMB 667 billion newly issued in 2025, while Panda bond issuance have reached RMB 119 billion.  Among the GSS+ dim sum and panda bonds issued, around 70% of them were aligned with CBI’s methodology. Wenhong also noted that the FTZ bond market is still in its early stages but has received strong regulatory support.

He pointed out that RMB-denominated bonds offer a lower cost of capital compared to USD bonds, making them an attractive option for issuers in developing countries. However, low participation from the Global South remains a challenge, due to awareness gaps and technical capacity. Wenhong shared successful case studies such as Egypt’s Sustainable Panda bond and Suzano’s RMB issuance, both of which demonstrated the significant cost savings and financing advantages of RMB issuance. He emphasised that capacity building and the creation of de-risking mechanisms will be crucial to attract more issuers from developing countries into the market.

Discussion - Key Opportunities and Challenges to grow the GSS+ Panda, Dim Sum and FTZ Bond Markets

1. Structural Barriers

The GSS+ bond market, particularly Panda bonds, faces several structural challenges:

• Foreign Exchange Volatility: Foreign issuers of Panda bonds encounter practical difficulties in converting RMB proceeds into hard currency and remitting these funds offshore. This uncertainty can discourage global issuers from tapping into the market.
• Credit Rating Thresholds: Issuers are often required to hold a AAA domestic rating to participate in the Panda bond market. This minimum rating requirement excludes lower-rated entities, particularly from developing countries, making it harder for them to access the market.
• Stringent Disclosure Requirements: China's green bond disclosure regulations are considered more stringent than international standards, with mandatory post-issuance reporting and assurance obligations that add complexity for issuers.
• Market Liquidity and Depth: Both Dim Sum and FTZ bonds suffer from limited market depth and liquidity. Investors and issuers alike view these markets as relatively small, making it difficult to accommodate larger issuances, and limited liquidity may fall short of the requirements of certain institutional investors. This liquidity constraint limits the market's ability to scale.
• Limited Awareness: Many global issuers and investors, particularly from developing countries, are not fully aware of these sustainable financing opportunities. Moreover, international banks may lack the training and resources to effectively market these products. Adding to the knowledge entry barrier is the inconsistent use of recognised green labels like the Multi-jurisdiction Common Ground Taxonomy (MCGT). Under-communicating the benefits these labels offer could lead to missed opportunities to further reduce financing costs.
• Absence of Anchor Investors: Participation from long term capital as anchor investors, such as sovereign wealth funds, regional banks, or other institutional investors, remains limited, which affects market  of confidence and liquidity. Anchor investors play a crucial role in providing the necessary confidence to kick-start the market and sustain its growth.

2. De-risking and Guarantee Mechanisms

One of the most discussed solutions to the challenges facing the GSS+ bond market is the availability and design of de-risking mechanisms:

• Partial Government and Philanthropic Guarantees: It was noted that partial guarantees from MDBs or philanthropic entities could still significantly reduce the upfront costs for issuers and de-risk investments, particularly for issuers from the Global South. Pilot programs in cities like Huzhou, where the government partially subsidises green and transition finance instruments, were cited as successful examples of this approach.

3. Addressing the Need for Product Diversification

The market’s growth is further constrained by a need for diversified products that can cater to various financial needs and risk profiles. While many diversification opportunities exist, development incorporating the following elements was discussed:

• Linking Traditional Fixed-Income Structures with Carbon Credits: The implementation of Articles 6.2 and 6.4 of the Paris Agreement could open up a new pathway to monetizing carbon credits for projects in developing countries. While no precedent case yet, this could also allow for structuring that links carbon credits with GSS+ bonds to support bond cash flows or improve credit assessments.
• Tenor Limitation: Currently, most Panda bonds are issued with short maturities of around three years. However, many sovereign and supranational issuers need long-term financing for infrastructure and development projects. This mismatch between the funding horizon and the project life limits the appeal of these bonds for long-term financing needs.

4. Cross-Market Integration and Regulatory Harmonisation

A key topic of discussion at the workshop was cross-market integration, focusing on the relationship between the Shanghai FTZ offshore RMB bond market and Hong Kong’s offshore RMB (CNH) market. Both markets are essential components of China’s broader offshore RMB framework, which facilitates the relatively free circulation of funds between these two regions. This interconnectedness presents a significant opportunity to enhance market liquidity and broaden access for issuers and investors across jurisdictions.

To maximise the potential of these markets, regulatory alignment was proposed to avoid duplication in key areas such as accounting, disclosure, and GSS+ labelling. The FTZ framework is designed to allow issuers to follow a single set of standards, which would align with Hong Kong's green standards while still meeting China's domestic eligibility criteria for bonds. This regulatory streamlining would help reduce complexity, attract more issuers, and improve market efficiency, benefiting both local and international participants.

5. Guarantees, Ratings, and Issuer Incentives

The Panda bond market faces significant challenges not in terms of cost, but rather accessibility:

• Credit Enhancement: Many issuers are required to hold a domestic AAA rating, which restricts access to the market for lower-rated issuers. The full or partial guarantees for Panda bonds, such as those provided by AIIB, are seen as a positive step, as it opens the door for issuers with lower ratings to participate in the market.
• Issuer Support: For markets to expand, targeted training and guidance for issuers with limited experience, particularly those from non-investment grade countries, is essential. These capacity building support should include but not limited to pre-issuance preparation, guidance on market practices, regulatory requirements, and how to structure GSS+ bonds in compliance with local and international standards. A collaborated effort from rating agencies, underwriting agencies, and MDB as guarantee providers are encouraged to expand market participation.

6. Liquidity Boosting Measures

Two complementary solutions were discussed to boost market liquidity:

• Monetary Authority Liquidity Facilities: The Hong Kong Monetary Authority (HKMA) has launched an RMB Trade Financing Liquidity Facility backed by the PBOC via currency-swap lines to provide liquidity during market downturns, ensuring the stability of interest rate in offshore RMB markets.
• Triparty Repo Platforms: Another innovative solution, presented by participating company, is the development of triparty repo platforms, which allow ESG- and climate-labelled bonds to be pledged as collateral, enabling bonds to maintain their sustainability characteristics while increasing market liquidity.

7. Government Incentives and Policy Recommendations

Policy incentives are crucial for stimulating the growth of the Panda and GSS+ bond markets:

• Hong Kong’s Green and Sustainable Finance Grant Scheme has been a key driver, as it provides subsidies for external reviews and Second-Party Opinions (SPOs), lowering the cost of issuance. Expanding similar subsidy programs to the Panda bond market and FTZ market could further accelerate market growth.
• Post-Issuance Reporting: There is a growing emphasis on measurable environmental outcomes. Governments can consider introducing incentives that are backed by assessments of each bond’s environmental impact, such as emission reductions or biodiversity gains.

8. Enabling GSS+ Issuance and Taxonomy Alignment

The alignment of green taxonomies plays a critical role in enabling the growth of the green bond market:

• ApplyingMulti-jurisdiction Common Ground Taxonomy (MCGT), jointly developed by China, the EU and Singapore, to label Panda, Dim Sum, and FTZ bond, enable issuers to align their instruments with internationally recognised green and transition standards, while simultaneously meeting China’s domestic eligibility criteria. Such an approach can further enhance the global acceptance of these instruments.
• Capacity Building: As many potential issuers lack the knowledge and clarity needed to align with green or sustainable standards and instrument-level requirement, services such as portfolio review could help identify opportunities that meet MCGT thresholds, enabling issuers to align their projects with international green standards.

Dr. Ma Jun’s Closing Remarks: Raising Awareness and Expanding Guarantees

In his closing remarks, Dr. Ma highlighted the need to raise awareness and expand guarantee facilities as low-cost, high-impact measures for advancing green finance. He advocated for leveraging private-sector actors—such as issuers, underwriters, investors, service providers, and second-party opinion firms—to promote relevant business opportunities to potential issuers in the Global South. Dr. Ma also emphasised the importance of diversifying guarantee facilities, encouraging greater participation from multiple MDBs and philanthropic organisations to provide full or partial guarantees that help reduce financing barriers for issuers in developing countries. Lastly, he underscored the significance of anchor investors and suggested promoting and drawing lessons from the successful international case studies (e.g., Egypt, Brazil, Hungary) to boost investor confidence and stimulate market growth in the GSS+ bond market.

Conclusion: Path Forward for Expanding GSS+ RMB-Denominated Markets

The workshop highlighted the immense potential for growing the GSS+ Panda, Dim Sum, and FTZ bond markets, emphasising the need to overcome existing barriers through strategic policy coordination, product innovation, and enhanced guarantee mechanisms. By addressing these challenges, improving market liquidity, and expanding market education and awareness, the RMB-denominated green bond market can play a crucial role in driving sustainable development and green transition across the Global South.