Powell says the proceeds of the offshore renminbi bond were swapped back to dollars to be used in International Financial Corporation's projects globally, although in the future it is possible that it could be kept in renminbi to fund green projects in China.
This would involve choosing specific green projects in China that have the same maturity as the bond issuance, and link the two, so the proceeds can be used in China projects directly, Powell says.
China has enormous potential to develop its green bond market because of the government's determination to build up green finance, and the scale of green projects available in the country, he says.
But at the same time the Chinese government needs to play an important role in ensuring the market for green bonds is as transparent and effective as possible, he says, adding that it can learn lessons from the international market on how to establish transparent processes, and ensuring that investors receive full disclosures on how the issuers manage the proceeds of the bonds.
"I think there is the scope for government endorsed verification agents to be established in China, so that the government gets behind an entity that is there to verify the green program of new issuers," Powell says.
The global market for green bonds has surged because there is a growing number of issuers both from the public and private sectors and multinational organizations, he says.
The growing number of green projects globally means there is an increasing number of projects ready to take on the proceeds of green bonds issuance.
"National agencies and corporates are all seeing the effects of climate change around them, and they are trying to push investments to mitigate the effects of climate change. The process started with public sector agencies creating products and frameworks so that other investors can build on it."
The importance of China's green bond agenda has attracted interest from governments such as the City of London Corp to work closely with China, lending its expertise in the bond market to help China grow its green bond initiatives.
When the then Lord Mayor of the City of London Fiona Woolf visited China last year, she spoke with representatives of the People's Bank of China about green finance. She said she believed it would be a great catalyst for further promoting China-UK green finance initiatives if a Chinese government issued a renminbi green bond in London.
"That would also be a big endorsement for London's capability as a key offshore renminbi center. It would make financial sense given that London's renminbi liquidity makes renminbi bond issuance easy and cost-effective.
"It will be a fantastic signal to London and the rest of the world that the Chinese government is taking the green agenda seriously. It could also unlock the potential for cities that struggle to raise finance from national governments."
Mark Boleat, policy chairman of City of London Corp, says London has a unique advantage in building up the green bond market because of the concentration of financial experts in the city, which already has a large bond market.
"Green bonds represent a new market, and one I think many people would find attractive. Our government has a strong commitment to improve the environment, and we have lots of expertise on bonds here in London, so all this makes London a natural center to grow the green bond market."
Despite the rapid growth of green bonds globally, there are still many challenges to growing the market globally and in China.
Eklund says a major challenge arises as to whether the standards of green bonds can be upheld. "There are many different kinds of issuers, and this is a challenge for the investors because there is no fixed international framework. Anyone who issues a bond can call it green."
In mature Western capital markets, green bonds are generally audited by an independent body to check that the proceeds from the bonds are indeed used for green projects. This has led to investor trust, and it is proven that the green credential of the bonds have made it easier for the issuers to raise the finance needed for projects.
However, in a market such as China, green bonds are not vetted by independent bodies or government departments, meaning there is a high risk that issuers are exploiting the market by falsely labeling bonds as green.
In China, the number of so-called green bonds is still small, and they are mostly issued by railway companies, although the green credentials of the projects are not guaranteed, Eklund says.
Eklund says one important thing is for China to try to emulate the green bond market of the West, meaning the market must be transparent, and there must be a standard check on what is said to be green.
Second, liquidity is needed in China's green bond market.
"This could be done by using regulations to incentivize existing banks or to create a green investment bank."
Finally, China should consider giving economic incentives to green bonds, or green finance initiatives, so as to give a good start to the growth of this market.
