Calls Emerge for Green Finance Standards in China as Carbon Neutral Products Rush to Market

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Experts within China are calling for the drafting of new rules and standards for green financing as domestic banks rush to release carbon neutral products at the prompting of authorities.

Beijing is pushing hard for the growth of green financing, after setting the ambitious emissions targets in 2020 of achieving peak C02 before 2030 and carbon neutrality by 2060.

The Chinese central bank made green financing a key work mission for 2021 as well as the 14th Five Year Period that runs from 2021 to 2025.

It also previously formulated standards for green bonds and green loans in 2015 and 2018 respectively, and is in the process of completing amendments to the “Green Bond Support Project Catalogue.”

“Achieving carbon neutrality requires huge amounts of investment, and needs market-based methods to guide the financial system in providing the required investment and financing support,” said Chinese central bank governor Yi Gang (易纲) in a speech delivered on 20 March.

This push for growth in green finance has already seen a slew of Chinese banks issue carbon neutral financial products, including big state-owned lender Bank of China, joint-stock bank Industrial Bank Co., Ltd. and policy lender China Development Bank (CDB).

On 18 March BOC served as the main underwriter for the issuance of China’s first carbon neutrality securitised products for State Grid International Leasing Company (国网国际融资租赁有限公司), while on the same date CDB issued China’s first carbon neutrality green bonds to global investors via the Bond Connect initiative to raise up to 20 billion yuan in funds.

Pan Helin (盘和林), head of the Digital Economy Research Institute at the Zhongnan University of Economics and Law, said to Securities Daily said that new standards are urgently needed to effectively marshal the green finance sector.

According to Pan Chinese regulators should formulate carbon neutrality and green financing standards and rules as early as possible, as well as conduct trials for the trading of carbon emissions credits and clearly formulate a carbon emissions system.

Pan said China’s carbon neutrality and peak carbon goals would provide huge potential impetus for growth in green financing.

“The policy push is indispensable for supporting the development of green finance,” said Pan. “Support for green low-carbon sectors can be provided via commercial bank loans, and can also be provided by the banking system via the sale of green bonds.

“It is also necessary to pry open the share and bond markets, and use government industry investment to leverage more market resources.”

As of the end of 2020 a total of 21 major banks in China had a combined green loan balance in excess of 11 trillion yuan.

Central bank data further indicates that as of the end of 2020 China was second in the world in terms of outstanding green bonds, at more than 800 billion yuan.

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