Carleton University, Ottawa, Ontario, Canada | June 23 - June 26, 2019
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3D: Governing Transitions
Time: 24/Jun/2019: 15:15-16:15 · Location: RB 3201
An Institutional Analysis of the Green Bond Markets in India and China
University of Waterloo, Canada
Introduction: Climate finance has played a crucial role in addressing climate change impacts through the funding of various adaptation and mitigation efforts around the world. One such tool that has mobilized vast amounts of money in the climate finance markets, has been the green bond. Green bonds are specifically used to raise capital to channel funding into cross-sector green or climate-friendly projects – thereby filling a significant funding gap when it comes to addressing climate efforts. Furthermore, it is now evident that these bonds are being issued in national interest of a country’s growth and transition to a low carbon and climate change resilient (LCR) economy. That is why governments around the world have a key stake in ensuring that this market succeeds and grows. The need for LCR investment is especially strong in emerging economies like India and China or even developed countries like Canada and Australia, all of which are vulnerable to physical and social impacts of climate change. However, research related to transitioning of these growing and resource-dependent economies towards being low-carbon, is currently limited.
Research Objective and Theory: One way to go about a cross-sector transition is by having institutional support, especially when it comes to innovative and disruptive markets like the green bond. According to Institutional Theory, institutional support can either be top-down or regulatory in nature, or a soft-power advocacy-driven approach. The research objective is to provide the basis for understanding how overall institutional support can potentially harness climate finance market growth. The findings of this paper have broader implications for how regulatory institutional transition can help support transformation to a low-carbon and climate change resilient (LCR) economy.
Research Questions: This research has documented the transition case study of emerging counties like India and China in scaling up their climate finance markets using innovative institutional means. The following research questions were asked:
1. What has been the role of institutional pressure on the green bond markets in China and India?
2. How do institutional factors further strengthen the growth of the green bond market in emerging economies like China and India?
Methods: A convergent parallel mixed method approach was used to fill the gaps in qualitative and quantitative data. Quantitative analysis includes descriptive statistics using excel, whereas qualitative analysis involves interviews with high-level market players in the international green bond markets.
Findings: Regulators were seen to be integral in growing the green bond market in emerging economies like India and China. Their existing role and ability to influence the market depended on prevailing norms and field logics. For China, the institutional pressure existed in the green bond market due to the presence of regulators. For India, the institutional pressure was not completely there, as the regulatory priority was on other economic and governance issues. However, the growth in either markets was driven by high priority social actors like other regulators, investors and industry associations, as well as due to international best practices.
Conclusion: In order to support climate finance growth and enable a stable institutional transition, regulators need to coordinate with other regulators to set out clear and harmonized definitions of green, enable the creation of market infrastructure and engage high priority social actors to implement the institutional changes in the green bond market.
Dr. Olaf Weber is a Professor at the School of Environment, Enterprise and Development at the University of Waterloo. He is the University Research Chair in Sustainable Finance and a CIGI Senior Fellow.
Vasundhara Saravade recently finished her Masters in Sustainability Management from the University of Waterloo and will be continuing as a PhD candidate starting Fall 2019.
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