Harnessing the role of green finance to support the construction of a beautiful China is a shared mission and responsibility of the financial and ecological environment systems. On October 12, the People's Bank of China, the Ministry of Ecology and Environment, the Financial Regulatory Bureau, and the China Securities Regulatory Commission jointly issued the "Guidance on Leveraging the Role of Green Finance to Serve the Construction of a Beautiful China" (hereinafter referred to as the "Guidance"), proposing 19 key measures from four aspects: increasing support for key areas, enhancing the professional service capacity of green finance, enriching green financial products and services, and strengthening implementation guarantees.

The "Guidance" emphasizes the need to focus on enhancing the green financial service capacity of financial institutions and enriching green financial products and services. It calls for a continuous increase in green credit allocation, the development of green bonds, green asset securitization, and other green financial products, and to strengthen green financing support.

Four major areas with commercial sustainability have been identified.

The "Guidance" outlines four key areas for green finance support, which are the construction of pilot zones for a beautiful China, the green and low-carbon development of key industries, the in-depth promotion of pollution prevention and control, and the protection and restoration of ecosystems.

How were the key areas determined, and what were the main considerations? In response to this, a person in charge of the relevant department of the People's Bank of China pointed out in an interview that these four areas were chosen mainly for two reasons: first, supporting these areas can effectively improve the quality of the ecological environment, accelerate the green and low-carbon transformation and upgrading of the industrial structure, effectively respond to climate change, and have significant ecological and environmental benefits. Second, these areas require substantial funding. By strengthening green financial products and services to support the research and development of environmental protection and green and low-carbon technologies, infrastructure transformation, and optimization of process flows, good market returns can be achieved, and the related projects have a certain degree of commercial sustainability.

On the basis of clarifying the focus of support, the "Guidance" further proposes to enhance the professional service capacity of green finance and enrich green financial products and services.

Specifically, banks, insurance companies, securities firms, and fund institutions should, based on their functional positioning, improve the internal management system by perfecting working mechanisms, optimizing process management, promoting the application of financial technology, and strengthening team building to enhance the quality of green finance supply. Continue to increase green credit allocation, develop green bonds, green asset securitization, and other green financial products, and strengthen green financing support. Focus on key links and areas such as regional ecological and environmental protection projects, carbon markets, resource and environmental elements, ecosystem-oriented development (EOD) projects, diversified climate investment and financing, and green consumption, and increase the intensity of green financial product innovation.

Research on expanding the scope of carbon emission reduction support tools.

To fully tap the "momentum" of financial institutions to carry out green finance, policy guarantees are indispensable. To this end, the "Guidance" clearly defines three key policy measures to support the construction of a beautiful China:

First, improve structural monetary policy tools. Research on expanding the scope of carbon emission reduction support tools, extending policy deadlines, and increasing the scale of re-lending to provide more low-cost and targeted support for key areas of green development and low-carbon transformation.

Second, give full play to the role of carbon markets. Steadily expand the industry coverage of the national carbon emission trading market, gradually enrich transaction varieties, transaction entities, and transaction methods.

Third, optimize incentive and restraint mechanisms. Improve the assessment system for green finance of financial institutions, conduct assessments on the implementation of green finance policies, and strengthen the application of assessment results. Encourage enterprises to develop transition plans, and for enterprises that have clearly committed to green and low-carbon transformation and have achieved good results, study and provide incentives.

In terms of policy implementation, a person in charge of the relevant department of the People's Bank of China said that on the one hand, departmental collaboration will be strengthened. Establish and improve the working mechanism for green finance to support the construction of a beautiful China, build a project library, strengthen government-bank-enterprise docking, and periodically push to various financial institutions. Improve the policy guarantee system and coordinate and solve the difficulties and problems in policy implementation in a timely manner.

On the other hand, improve supporting basic systems. Promote the establishment of a unified green finance and transition finance standard system. Establish and improve standards and methods for carbon emission accounting of key industries and enterprises, carbon reduction volume accounting of projects, and carbon footprint accounting of products. In addition, while guiding financial institutions to support key areas in the construction of a beautiful China, pay close attention to the actual environmental benefits of green loans and green bonds, strengthen environmental information disclosure, and ensure that funds are invested in line with green and low-carbon development requirements.

Source: “China Banking and Insurance News”, 13 October 2024