China to Ease Foreign Access to Domestic Green Finance Market

PBOC governor Yi Gang also said China will work to enhance its green finance standards, and explore the introduction of mandatory reporting of environmental risks by FIs.

The PBOC (People’s Bank of China) has pledged to harmonise its green finance standards with international norms, and to ease access to its domestic green finance market for foreign investors, as part of efforts to speed up its transition to a low-carbon economy.

In September, China announced ambitions to reach its carbon emission peak by 2030, and achieve carbon neutrality by 2060. “This long-term vision reflects China’s commitment to green and low carbon development,” PBOC governor Yi Gang said at SFF x SWITCH on Wednesday (9 December).

“It also means, to meet this climate objective, China needs to speed up its transition to low-carbon production and consumption,” he said.

As of June 2020, outstanding green lending in China exceeded CNY 11 trillion, which ranks the country first globally. Its current stock of green bonds stood at CNY 1.2 trillion, the second highest in the world.

According to Yi, this growth has been supported by PBOC efforts to improve the policy framework for green finance, including by rolling out specific policies on green bonds, green credit and environmental information disclosure.

The PBOC is also in the process of updating its Green Bonds Endorsed Project Catalogue, to remove projects related to fossil fuel production and consumption and include more climate-friendly activities. The PBOC already excluded ‘clean coal’ from the list of projects eligible for green bonds in draft guidelines published in May.

Yi also noted that the PBOC has strengthened policy incentives to reduce emissions, including through evaluations of banks’ performance in supporting green finance. The central bank is meanwhile also encouraging innovation in green finance products such as green credit, green bonds, green agricultural insurance, clean energy insurance, and green trusts – all of which are already available in China.

In addition, Yi said pilot programmes for green finance reforms have been established in 9 cities in 6 provinces since 2017. “In these pilot programs, strong progress has been made in strengthening green finance policy framework, introducing new products and services, and implementing policy incentives,” he said.

He also spoke of China’s international cooperation on green finance, including its work with the G20, the NGFS (Network of Central Banks and Supervisors for Greening the Financial System), and the IPSF (International Platform on Sustainable Finance).

Moving forward, the PBOC will look to further improve its standards for green credit, green bonds and green funds to support China’s carbon neutrality objective, and also consider introducing mandatory requirements for financial institutions to disclose environment-related information.

“We will enhance capacity for analysing and managing environment and climate risks,” Yi said, adding that the PBOC will also strengthen its study on the potential impact of environment and climate risks on financial stability.

He pledged to make it easier for international investors to access China’s green finance market, including by promoting harmonisation of its domestic green finance standards with those abroad and by strengthening international cooperation.

The PBOC will increasingly harness fintech to promote green finance. In Huzhou city, an integrated green finance service platform using big data technology has already been established, which Yi said is helping to bolster access to environmental- and climate-related information, and connect green projects to financial institutions.

“The PBOC will continue to work with all partners in mobilising more private funds to support low carbon and sustainable development.”

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