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

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.