International coordination is crucial for success
“We are making good progress in comparing China and EU taxonomies at the International Platform on Sustainable Finance. We expect to deliver a common ground taxonomy later this year”.
Yi Gang, the Governor of the People's Bank of China, opened his keynote address by acknowledging the EU and China’s shared understanding of the financial system’s potential to help fight climate change and reiterated China’s strong support of green finance and its development.
These principles are backed up by concrete actions on the ground. For example, over the last 5 years, People's Bank of China (PBoC) has been working on establishing and improving its green finance policy framework in varied areas, including: taxonomy, disclosure policy and incentive and risk management.
And more concretely still, “green loans in China reached over 2 trillion US dollars at the end of June. Green bonds issues totalled 55 billion US dollars in the first 8 months this year – up 150% on a year on year basis”, Governor Yi Gang announced. But that’s not all, issuance of carbon neutrality bonds introduced in early 2021 have already “exceeded 180 billion Renminbi”, the Governor added.
The Governor stated that both China and the EU share the same climate objectives – to achieve carbon neutrality. With the aim of reaching these goals, China is focusing its work in four key areas:
- The improvement of carbon price mechanisms. The Governor mentioned that three months ago, China launched its national emissions trade scheme, and he recognised the importance of engaging the financial system to improve pricing carbon emissions.
- Coordination on green taxonomies. China and the EU are working together on comparing their respective taxonomies on sustainable finance, and “expect to deliver a common ground taxonomy later this year”, the Governor said. Moreover, the PBoC has now removed fossil fuels from the Green Bond Endorsed Projects Catalogue.
- Mandatory disclosure of climate information. The Governor praised the extensive work already done by the EU in this regard, and noted that China has now set clear disclosure requirements for sustainable financial products. He mentioned that in July, the PBoC introduced guidelines for financial institutions to disclose carbon emissions (among other environmental-information), which is largely consistent with the recommendations issued by the Task Force on Climate-Related Financial Disclosures.
- Finally, mobilising private capital for the transition process. The People’s Bank of China is developing a new “targeted, market-based and transparent tool”, aiming to provide low cost funds for eligible financial institutions to finance emission reduction projects”, the Governor announced.
Referring to China’s recent commitment on stepping up support for other developing countries in green and low carbon energy and stopping building new coal-powered projects abroad, the Governor noted that “International coordination is crucial for success in these areas”.
The Governor concluded by noting that the PBoC is working hard towards initiatives supporting green finance, and highlighted that it is looking forward “to expanding cooperation to further scale-up green finance and to support green development”.