Unbeknownst to many, China last year emerged as the world's second-largest green bond market amid the country's green transformation, with local companies attaching greater importance to such financial products, a latest industry report has revealed.

Up to $68.2 billion worth of green bonds were issued in China in 2021, next only to the United States, according to the report jointly released by international organization Climate Bonds Initiative and China Central Depository& Clearing's research center on Monday.

The report was compiled for the sixth year in a row. In 2020, China ranked fourth globally in terms of green bonds issued, the two organizations said.

By the end of last year, green bonds worth $199.2 billion were issued in China. In the US, green bonds were valued at $305.5 billion last year, the report stated.

Incremental green bonds grew by 186 percent year-on-year in China in 2021, overtaking all the other markets in terms of the annual growth rate.

Financial firms issued $24 billion worth of green bonds in 2021, up 237 percent year-on-year. Green bonds issued by nonfinancial companies surged 482 percent year-on-year to $31.2 billion, which was about 46 percent of all the green bonds issued last year.

It was the first time in China that nonfinancial companies issued more green bonds than financial service providers.

Some 61 percent of the green bond financing was used for the development of renewable energy last year, the report stated. Nearly 19 percent of the financing flowed to the low-carbon transportation sector and another 9 percent to low-carbon construction.

In all, 122 companies, mostly public utilities and those from the finance and industrial sectors, issued $55.5 billion worth of green bonds in the onshore market last year, up 231 percent year-on-year. Financial service providers continued to dominate the offshore green bond issuance in 2021, the report stated.

According to the International Energy Agency, China is likely to reach the peak of carbon emissions before 2030 if it can attain the short-term energy goals listed in the 14th Five-Year Plan (2021-25). This will depend on whether or not China can improve its energy efficiency, use more renewable energy and reduce use of coal.

China's 2060 carbon neutrality goal shall require larger-scale investment. Green finance shall play an important role to that end, with the use of financial tools getting more pronounced, the joint report stated.

Shi Yi, vice-general manager of CCDC's research center, said a green channel should be set up for the issuance of green bonds. That will be in line with the information disclosure standards for environmental benefits.

Favorable policies should be provided for such bonds so that they can be approved and registered at a faster pace. Similar practice can be applied to green credit asset-backed securities, he said.