China's issuance of green bonds in the first quarter fell to the lowest level in more than three years amid the pandemic disruption, although the volume started recovering in April.

In the first three months of 2020, China issued $2.32 billion worth of green bonds, less than a fifth of $13.06 billion in the previous quarter and about a third of $7.59 billion a year earlier, according to Climate Bonds Initiative, or CBI, a U.K. research firm. The first-quarter issuance was the lowest since the second quarter of 2016, when China issued only $1.03 billion worth of green bonds, CBI said.

China is one of the world's largest green bond issuers, as it builds its war chest to fund its emission reduction efforts. Local commercial banks remained the leading issuers of such bonds in the first quarter, according to CBI.

COVID-19 "had a big impact on the market," with most of China in lockdown in most of the first quarter, CBI analyst Alan Meng told S&P Global Market Intelligence.

Meng also attributed the plunge to more issuers shifting to pandemic bonds. Since February, China allowed companies to launch new debt within days instead of weeks, on condition that at least 10% of the proceeds are used to "fight the virus." Many issuers sold their so-called virus bonds at coupon rates lower than their previous debt of comparable tenors, as the government has encouraged financial institutions to subscribe to the debt and that created demand to drive yields lower.

In April, CBI recorded more than $5 billion of new green bonds from Chinese issuers, in which $2.58 billion was aligned with international green standards and $2.45 billion was not, Meng said.

"We have already seen the market bounced back quickly," he added.

If this pattern continues, he added, the second quarter could return to the level of the same period last year, and more than half will likely be aligned with international standards. China's green bond issuance in the second quarter of 2019 totaled $16.43 billion.

Green bonds aligned purely to local rules allow Chinese issuers to use up to 50% of proceeds to repay bank loans or for general working capital, while international standards allow no more than 5% of proceeds for that. Chinese definitions also accept clean coal and coal efficiency improvement as green projects, while global standards do not.