In pursuit of the carbon peaking and carbon neutrality goals, the People’s Bank of China (PBC) launched the Carbon Emission Reduction Facility (CERF) for financial institutions. This structural monetary policy instrument is aimed to mobilize more social capital to promote carbon reduction and support the development of clean energy, energy conservation, environmental protection, carbon-reduction technology, and certain other factors. Under this facility, PBC will provide low-cost funds to financial institutions and guide the financial institutions to extend carbon-reduction loans at rates close to the loan prime rate of the same maturity. PBC also published a set of questions and answers (Q&A) on the carbon emission reduction facility.
For the time being, the facility is available to financial institutions that are licensed to operate nationwide. For qualified carbon emission reduction loans, PBC provides commercial lenders with funds worth 60% of the principal at the rate of 1.75%. For the facility to be well-targeted and directly supportive of low-carbon transition, PBC will require financial institutions to disclose information about such carbon emission reduction lending and the amount of emission reduction supported by such lending. The information disclosed will be verified by third-party professional institutions and subject to public scrutiny. The facility is designed to enhance financial institutions’ awareness of the importance of green transition, encourage more social capital to support the green and low-carbon industries, and advocate the philosophy of green living, green production, and circular economy, which will help achieve the carbon peaking and carbon neutrality goals.
Keywords: Asia Pacific, China, Banking, Carbon Neutrality, ESG, Climate Change Risk, Q&A, Sustainable Finance, low-Carbon Economy, Carbon Emission Reduction Facility, 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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