Around $90 billion of green bonds were issued last year, more than double the amount of 2015. Chinese green bonds made up 37 percent of issuance, compared with 2 percent in 2015.
The proceeds from so-called green bonds help finance projects such as renewable energy, the energy-efficiency sector, green transport and wastewater treatment.
HSBC expects issuance to be at around $90-120 billion this year, a growth rate of 0 to 30 percent.
"We think growth will slow, as last year’s commencement of Chinese green bond supply was a one-off that cannot be repeated," the bank said in a research note.
Policymakers are also not likely to intervene in the green bond market this year while it is still growing and developing standards.
"If green quality standards remain high, then we expect that in time, policy practitioners may then step in and help further to accelerate market growth," it added.
The green bond market is widely expected to expand steadily in future, as a global climate change agreement and concerns over the environment boost spending on green projects.
But it is still a tiny fraction of the overall bond market. Commonly agreed standards on what constitutes a green bond and transparency over how proceeds are used are needed to make the market become more mainstream.
HSBC said sovereign green bond issuance could grow slightly in 2017, with up to six governments expected to issue sovereign green bonds.
(Reporting by Nina Chestney; editing by Susan Thomas)
