Diffusion and innovation for transition: transnational governance in China’s green bond market development

ABSTRACT

Green bonds, an emerging instrument of Chinese environmental economic policy, represents an important step in the country’s effort to systemically transform towards ‘ecological civilization’. The involvement of transnational actors alongside Chinese state actors make for a compelling case in examining green finance transitions as a phenomenon in global environmental governance. This paper leverages the transition management framework, adapting concepts from transnational governance to develop a ‘transnational transition management’ lens with which a longitudinal analysis of the policy development cycle is viewed. In combination with social network analysis, we use this framework to explore the evolution of green bonds with diverse forms of secondary evidence. We identify a relationship between the rapid expansion of the Chinese green bond market with coalitions of policy makers and organizations in transnational spaces that catalyze policy diffusion and innovation through consensus building, coordinated experimentation, and distributed monitoring and evaluation; predominantly steered and led by the People’s Bank of China. In addition, the political economy of actors in these networks help explain resistance to convergence with global green bond standards. This research suggests an agenda for examining governance as an entry point to analyze and develop strategies for sustainability transitions in finance.

KEYWORDS:

• Green bonds
• China
• policy diffusion
• transition management

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes on contributors

Christian Elliott is a PhD student in the Department of Political Science at University of Toronto.

Le-Yin Zhang is Professor of Urban Economic Development in The Bartlett Development Planning Unit at University College London.

Notes

1. Our framework, to be explored in subsequent sections, differentiates from other transnationally-concerned frameworks in the literature: Global Innovations Systems Framework (Binz & Truffer, 2017), focuses on transnational technological innovation where the unit of analysis is the firm. Another is ‘deep’ system transition analysis (Schot & Klanger, 2018) that examine long-term, paradigmatic societal changes.

2. Whether labeled green bond issuances were additional to baseline financial flows is a separate, but important, question – though outside of the scope of this paper.