The 50-floor building designed to look like a bundle of chopsticks will stand out in China’s industrial hub of Shenzhen. It will also use natural ventilation, have a green roof and collect rainwater for irrigation — but that’s not unusual these days.

The Kaisa Group Holdings project is just one of hundreds around the world being driven by green bonds. Property firms have been among the cheerleaders of a rush to ethical finance, posing a challenge for investors to scrutinize how green this building frenzy actually is, at a time when debt from the sector is under pressure on contagion from distressed developer China Evergrande Group.

In China, sales of green debt from developers surged to $10.3 billion so far in 2021, more than three times the whole of 2020. It’s a similar picture in Europe, where they have more than doubled to $17.2 billion and make up about a sixth of the corporate green market. In the U.S., they have surpassed last year at $6.85 billion, nearly a quarter of the total.

Investors are clamoring for the chance to put their money to environmental use, yet may just be fueling more development from a building and construction sector that accounts for about 40% of energy-related carbon dioxide emissions. Finding the companies actually cutting pollution means sifting through a heap of building certifications and sustainable bond rules, which obscure potential greenwashing.

“The use of proceeds from green bonds in the real estate sector focuses on energy efficiency — heating and cooling of buildings — and not so much on environmentally harmful factors from building materials such as cement,” said Jyri Suonpaa, a green bond fund manager at Alandsbanken Abp in Finland. “New issuance from the sector is a lot higher than from other parts of the market, which increases the risk of greenwashing.”

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