Kidney said that while there is very little money to be made in possessing green bonds, the strong demand for them in the international market may produce price benefits of a few basis points, although this remains to be proven.

But to grow this market properly, the Chinese government should focus on developing clear guidelines on what can be considered green bonds and create incentives for market participants to grow the green bond market.

The Chinese government should also help this market's growth, through policy incentives, by encouraging banks to issue green bonds for themselves or to provide liquidity for this market, Kidney said.

Also, incentives such as tax credits, discount loan structures and regulatory policies that are now applied to China's rural agricultural loan market can also be used to help grow the green bond market, he said.

Chinese issuers have great potential to attract capital both from China's domestic capital market and overseas capital markets, through the issuance of green offshore renminbi bonds, Kidney said.