Green finance can be understood as “financing of investments that provide environmental benefits in the broader context of environmentally sustainable development.” Several instruments are available for green finance, including Green Bonds, Sustainability-linked Loans, Green Loans, and Green Insurance.
Green finance policies
[China] Guidelines for Establishing the Green Financial System
In 2016, the People’s Bank of China (PBoC), along with six other government agencies including the China Securities Regulatory Commission (CSRC), issued Guidelines for Establishing the Green Financial System. The Guidelines, which form part of the Chinese government’s wider efforts to support the development of an ecological civilisation, aim to promote sustainable development, establish a green financial system, and improve the functioning of the capital market in allocating resources and servicing the real economy.
The guidelines explicitly discuss the role of the securities market in supporting green investment. They recommend improvements in the rules and regulations for green bonds, reductions in the financing costs of green bonds, the formulation of standards for third-party verification of green bonds and green credit ratings, support for the development of green bond indexes, green equity indexes and related products, and encouragement for institutional investors such as pension and insurance funds to make green investments.
[China] Guidance on Promoting the Investment and Financing in Response to Climate Change
On October 26, 2020, five Chinese government ministries/regulators jointly issued the “Guidance on promoting investment and financing to address climate change”. The Climate Finance Guidance came weeks after Chinese President Xi's announcement at the United Nations' General Assembly to strengthen ambitions for China to become carbon-neutral by 2060 and peak carbon emissions before 2030. While the focus of the guidance is on domestic climate finance including a timeline for having relevant policies for investment ready by 2025 and even the ambition of advancing the construction of a market mechanism for carbon-emission trading through China’s ETS, the guidance also stresses important aspects of climate finance in the Belt and Road Initiative (BRI).
The document also states that China aims to “regulate offshore investment and financing activities” and manage climate risks. The document furthermore emphasizes China's ambition to engage in research and international cooperation on climate investment and financing standards. While this 'guiding opinion' is not a law and thus has little direct legal weight, it is important for greening the Belt and Road Initiative.
[China] Beijing Initiative for Belt and Road Green Development
At the Third Belt and Road Forum for International Cooperation High-level Forum on Green Development held in Oct 2023, the "Beijing Initiative for Belt and Road Green Development" (hereinafter referred to as the Initiative) was officially released and included in the Chairman's Statement and the list of outcome documents.
The Initiative reviewed the positive progress made in green development in the 10 years of the Belt and Road Initiative, and the important role of Belt and Road cooperation in promoting countries to achieve green and sustainable development and the 2030 Sustainable Development Goals.
It proposes that all parties should follow the principle of extensive consultation, joint contribution and shared benefits, strengthen policy communication and strategic alignment on green and low-carbon development, share concepts and practices on green development, and call for more cooperation on climate change, biodiversity management, pollution prevention and control, green infrastructure, green energy, green transportation and green finance. The Initiative encourages the International Alliance for Green Development under the Belt and Road Initiative to play its role as a platform and deepen the Partnership for Green Development.
The initiative was initiated by more than 30 co-sponsors, including governments and environmental authorities, international organizations, research institutions, financial institutions and enterprises from 21 countries.
The full document can be seen at https://www.yidaiyilu.gov.cn/p/0IFPHQIC.html
[China] Guidelines for Ecological Environmental Protection of Foreign Investment Cooperation and Construction Projects
Within 25 articles, the 2022 Guidelines (re-)emphasize how Chinese companies operating abroad are encouraged to follow international or Chinese best practices for environmental protection and sustainable development.
See full document here.
[China] Green Finance Guidelines for Banking and Insurance Industry
On June 1, 2022, the China Banking and Insurance Regulatory Commission (CBIRC) issued the Green Finance Guidelines for Banking and Insurance Industry. The Guidelines consolidate the 2019 Guidelines on the high-quality development for the Banking and Insurance Industry and focus particularly on green banking (e.g., green loans, green credit) and the insurance industry.
The Guidelines address banking and insurance institutions “to prevent environmental, social and governance (ESG) risks” and “to strengthen ESG information disclosure and interaction with stakeholders”. The Guidelines describes how banking and insurance institutions should integrate the ESG requirements into management processes and risk management system.
See full document here
[China] Development Plan for Financial Standardization During the 14th Five-Year Plan Period (2021-2025)
In February 2022, the People’s Bank of China (PBC), the State Administration for Market Regulation (SAMR), the China Banking and Insurance Regulatory Commission (CBIRC) and the China Securities Regulatory Commission (CSRC) jointly issued the Development Plan for Financial Standardization During the 14th Five-Year Plan Period (2021-2025). The document states that to achieve the goals of peaking carbon emissions and reaching carbon neutrality, in the coming years, the financial industry will focus on effective top-level design and planning for green finance, the improvement of policy framework and incentive mechanisms for green finance, and leveraging the financial sector’s role in supporting green development. Specifically, one of its main objectives is “ to accelerate the refinement of the green finance standard system”, which includes standardizing green bond criteria, continuously enriching standards for green financial products and services, establishing standards for a green project repository, expediting the formulation of environmental information disclosure standards for listed companies and bond-issuing enterprises, and establishing an ESG (Environmental, social, and governance) evaluation standard system, among others.