While presenting at a briefing on green finance, Wang Xin, the Director of the Research Bureau of PBC highlighted that PBC and other departments have continuously worked toward the development of green finance. Mr. Xin outlined the five pillars of green finance and elaborated on the planned next steps in this area. As part of the next steps, PBC will strategically focus on issues such as carbon peaking and carbon-neutrality goals and on resource allocation, risk management, and market pricing, to support green finance.
According to Wang Xin, the five pillars of green finance are:
- Accelerating the establishment of a green financial standard system. The green finance statistical system is gradually improving and significant progress has been made in the formulation of a number of green finance standards. The comparative study of China-Europe green finance standards is about to be completed, providing for the regulation of green finance business, ensuring green finance to achieve commercial sustainability, and promoting green economic development.
- Continuous strengthening of information disclosure requirements and financial institution supervision. This refers to the continual efforts to promote the classification of financial institutions, securities issuers, and public departments with goal of improving the mandates for, and standardization of, environmental information disclosure. The pilot work on climate and environmental information disclosure by Chinese and British financial institutions has continued to advance, with the pilot experience having been replicated and promoted. The green financial information management system developed by PBC has realized the direct connection of information between supervisory departments and financial institutions and has improved the effectiveness of green financial business supervision.
- Gradually improving the incentive and restraint mechanism. Through policies such as green financial performance evaluation and interest subsidies, this involves guiding financial institutions to increase green asset allocation and strengthen environmental risk management. These initiatives will help improve the financial industry’s ability to support green and low-carbon development.
- Enriching green financial products and market system. By encouraging product innovation, improving the issuance system, standardizing transaction procedures, and enhancing transparency, China has formed a multi-level green financial product and market system. The quality of green financial assets is generally good. The non-performing loan rate of green loans is much lower than the non-performing loan rate of national commercial banks. There is no default case for green bonds.
- Deepening of international cooperation in green finance. This involves actively using various multilateral and bilateral platforms and cooperation mechanisms to promote international exchanges on green finance and enhance the international community's recognition and participation in green finance policies, standards, products, and markets of China.
Going forward, PBC will focus on:
- Building a long-term mechanism and improving design of financial support for green and low-carbon transformation. This includes introducing a package of policies and measures for financial support of green and low-carbon development, improving the green financial performance evaluation system of financial institutions in a timely manner, and continuously expanding the application scenarios of evaluation results.
- Improving green finance standards and promoting carbon accounting by financial institutions. This includes promoting the establishment of a mandatory, market-oriented, and legal-based financial institution climate and environmental information disclosure system, in addition to strengthening the application of financial technology in environmental information disclosure.
- Innovating in the area of green financial products and services and building a multi-level green financial market system. This includes promoting the development of financial products such as green loans, green bonds, and green insurance, and orderly developing carbon financial products such as carbon futures and other derivatives.
- Preventing financial risks related to climate change. This involves encouraging financial institutions to perform risk assessment and stress testing and strengthening the prudent management of climate-related financial risks.
- Promoting local financial reform and innovation pilot, supplemented by international cooperation and participation in global climate governance.
Keywords: Asia Pacific, China, Banking, Insurance, Securities, ESG, Climate Change Risk, Low Carbon Economy, Sustainable Finance, Disclosures, Work Priorities, PBC
Dr. Denton provides industry leadership in the quantification of sustainability issues, climate risk, trade credit and emerging lending risks. His deep foundations in market and credit risk provide critical perspectives on how climate/sustainability risks can be measured, communicated and used to drive commercial opportunities, policy, strategy, and compliance. He supports corporate clients and financial institutions in leveraging Moody’s tools and capabilities to improve decision-making and compliance capabilities, with particular focus on the energy, agriculture and physical commodities industries.
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