Chinese Central Bank Calls for “Leaping Growth” in Green Finance, Commits to Peak Carbon and Carbon Neutrality Targets

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The People’s Bank of China (PBOC) has reiterated its commitment to green financing and related environmental protection goals in the lead up to the Chinese New Year.

“PBOC is continually improving the top-level design of green finance, supporting the leaping development of green finance, and has achieved the initial formation of the five main pillars of green finance,” said Wang Xin (王信), head of PBOC’s research department, at a press conference held on 9 February.

According to Wang the “five main pillars” of green finance in China include:

  1. The accelerated establishment of a green finance standards system. “PBOC abides by the principles of ‘domestic unity and international congruity,’ gives full consideration to international concerns and national circumstances, focuses on the three main areas of climate change, pollution regulation and energy efficiency and emissions reduction, and has continually improved the green finance standards system. At present, the green finance statistical system is gradually improving, and Sino-European green finance standardisation comparison research work is about to be completed.”
  2. Continual strengthening of information disclosure requirements and regulation of financial institutions. “Continually drive financial institutions, securities issuers and the public sector to upgrade mandatory and standardised environmental information disclosures.”
  3. Gradual improvements to incentive and restraint mechanisms. “Use green finance performance assessments, subsidies and other policies to guide financial institutions to increase their allocations to green assets and strengthen environmental risk management. Increase the ability of the financial sector to support green, low-carbon growth.”
  4. Continually diversify the green finance product and market system. “By means of innovations in incentivization products, improvements to issuance systems, standardisation of transaction procedures and increases to transparency, China has already formed a multi-tier green financial products market and system. As of the end of 2020 China’s green lending balance was nearly 12 trillion yuan (approx. USD$1.86 trillion) making it first in the world, while outstanding green bonds in China totalled 813.2 billion yuan (approx. USD$126.31 billion), putting it in second place globally. The green loan non-performing loan ratio is lower than the NPL for nationwide commercial banks, and there has yet to be a default on green bonds.”
  5. Continual deepening of international cooperation in green finance. “Actively use various multilateral and bilateral platforms and cooperative mechanisms to drive international exchanges in green finance. Raise international recognition and participation in China’s green finance policies, standards, products and markets.”

Wang Xin said that the next step would be for PBOC to “focus on peak carbon and carbon neutrality goals,” with key work points including:

  1. Establishment of long-term mechanisms, improvements to the top-level design of financial support for green and low-carbon transition.
  2. Improvement to green finance standards, driving financial institutions to engage in carbon accounting.
  3. Innovation of green financial products and services, establishment of a multi-tier green financial market system.
  4. Prevention of financial risk in relation to climate change. Driving financial institutions to undertake risk assessments and pressure tests, strengthen prudential regulation of climate-change related financial risk.
  5. Further driving local financial reform and innovation trials.
  6. Deepen international cooperation, actively participate in global climate regulation.

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