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Research report

2021- 01 -20 edition

TSINGHUA UNIVERSITY NATIONAL INSTITUTE OF FINANCIAL RESEARCH

Green Finance in China: Overview, Experience and

Outlook

Research Center for Green Finance Development

CHENG Lin1, CHEN Yunhan, WU Yue

Abstract

Recently, China has made significant advancement in the development

of green financial system through the introduction of green financial

standards, disclosure requirements and a series of measures to spark

innovation in green financial products. This report aims to provide an

overview of green finance in China, its origin, development, status quo

and outlook, with a focus on the market and relevant market players.

The Chinese experience in developing green finance, through policy

coordination, incentives and standard setting, can become a reference

for other emerging economies that seek to develop their domestic green

finance market2.

1Cheng Lin is Deputy Director of the Research Center for Green Finance Development.

Chen Yunhan and Wu Yue are Analysts at the Research Center for Green Finance

Development.

2This report is prepared by the Research Center for Green Finance Development with

support from GIZ.

研究报告

（2021 年第 1 期总第 99 期） 2021 年 1 月 20 日

清华大学国家金融研究院

中国绿色金融发展的历程、经验及展望

绿色金融发展研究中心

程琳3、陈韵涵、吴越

【摘要】近年来，我国通过出台绿色金融标准、披露要求、激励绿色

金融产品创新等一系列措施，逐渐建立了国内绿色金融市场体系。本

报告将从绿色金融市场和市场参与者的角度出发，对我国绿色金融的

起源、发展、现状和前景进行梳理，希望我国绿色金融在政策协调、

政策激励和标准制定方面的经验为其他有意发展绿色金融市场的新兴

经济体提供有益参考4。

3程琳是绿色金融发展研究中心副主任，陈韵涵和吴越是绿色金融发展研究中心研

究人员。

4本报告的编写得到了德国国际合作机构（GIZ）的支持。

Contents

Foreword.................................................................................................................................... 4

1. Overview of Green Finance in China.....................................................................................6

1.1 Green Financial Products and Market................................................................. 9

1.2 Green Finance and Ecological Civilization........................................................ 17

1.3 Policy Framework and Stakeholders..................................................................18

2. National Taxonomies for Green Financial Assets............................................................... 30

2.1 Guidelines for Green Credits and Statistics.............................................................. 30

2.2 Catalogue of Green Bond Endorsed Projects............................................................33

2.3 Green Industry Guidance Catalogue......................................................................... 34

2.4 Harmonization of the standards................................................................................. 35

3. Pilot Projects and Regulatory Policies for Green Finance................................................... 37

3.1 Pilot Projects and Key Milestones for Green Finance..............................................37

3.2 Regulatory and Incentive Policies for Green Finance.............................................. 42

4. International Initiatives and Collaboration...........................................................................49

4.1 Co-chairing the G20 Green Finance Study Group............................................49

4.2 Participating in the NGFS as a Founding Member...........................................50

4.3 Greening Investments in the Belt and Road.......................................................51

4.4 Bilateral and Multilateral Cooperation..............................................................52

4.5 Capacity Building for Green Finance.................................................................53

5. Conclusion and Outlook.......................................................................................................55

5.1 Lessons for mainstreaming green finance.......................................................... 55

5.2 Future priorities for scaling up green finance................................................... 57

Annex 1: The Framework of the Chinese Green Financial System.................................. 60

Annex 2: Supporting polices to Green Finance...................................................................62

Annex 3: Green Financial Products and Services in Pilot Zones...................................... 68

Annex 4: Green finance regulations/initiatives that apply to Chinese outbound

investment/BRI.......................................................................................................................71

/72

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1Researchreport2021-01-20editionTSINGHUAUNIVERSITYNATIONALINSTITUTEOFFINANCIALRESEARCHGreenFinanceinChina:Overview,ExperienceandOutlookResearchCenterforGreenFinanceDevelopmentCHENGLin1,CHENYunhan,WUYueAbstractRecently,Chinahasmadesignificantadvancementinthedevelopmentofgreenfinancialsystemthroughtheintroductionofgreenfinancialstandards,disclosurerequirementsandaseriesofmeasurestosparkinnovationingreenfinancialproducts.ThisreportaimstoprovideanoverviewofgreenfinanceinChina,itsorigin,development,statusquoandoutlook,withafocusonthemarketandrelevantmarketplayers.TheChineseexperienceindevelopinggreenfinance,throughpolicycoordination,incentivesandstandardsetting,canbecomeareferenceforotheremergingeconomiesthatseektodeveloptheirdomesticgreenfinancemarket2.1ChengLinisDeputyDirectoroftheResearchCenterforGreenFinanceDevelopment.ChenYunhanandWuYueareAnalystsattheResearchCenterforGreenFinanceDevelopment.2ThisreportispreparedbytheResearchCenterforGreenFinanceDevelopmentwithsupportfromGIZ.2研究报告（2021年第1期总第99期）2021年1月20日清华大学国家金融研究院中国绿色金融发展的历程、经验及展望绿色金融发展研究中心程琳3、陈韵涵、吴越【摘要】近年来，我国通过出台绿色金融标准、披露要求、激励绿色金融产品创新等一系列措施，逐渐建立了国内绿色金融市场体系。本报告将从绿色金融市场和市场参与者的角度出发，对我国绿色金融的起源、发展、现状和前景进行梳理，希望我国绿色金融在政策协调、政策激励和标准制定方面的经验为其他有意发展绿色金融市场的新兴经济体提供有益参考4。3程琳是绿色金融发展研究中心副主任，陈韵涵和吴越是绿色金融发展研究中心研究人员。4本报告的编写得到了德国国际合作机构（GIZ）的支持。3ContentsForeword....................................................................................................................................41.OverviewofGreenFinanceinChina.....................................................................................61.1GreenFinancialProductsandMarket.................................................................91.2GreenFinanceandEcologicalCivilization........................................................171.3PolicyFrameworkandStakeholders..................................................................182.NationalTaxonomiesforGreenFinancialAssets...............................................................302.1GuidelinesforGreenCreditsandStatistics..............................................................302.2CatalogueofGreenBondEndorsedProjects............................................................332.3GreenIndustryGuidanceCatalogue.........................................................................342.4Harmonizationofthestandards.................................................................................353.PilotProjectsandRegulatoryPoliciesforGreenFinance...................................................373.1PilotProjectsandKeyMilestonesforGreenFinance..............................................373.2RegulatoryandIncentivePoliciesforGreenFinance..............................................424.InternationalInitiativesandCollaboration...........................................................................494.1Co-chairingtheG20GreenFinanceStudyGroup............................................494.2ParticipatingintheNGFSasaFoundingMember...........................................504.3GreeningInvestmentsintheBeltandRoad.......................................................514.4BilateralandMultilateralCooperation..............................................................524.5CapacityBuildingforGreenFinance.................................................................535.ConclusionandOutlook.......................................................................................................555.1Lessonsformainstreaminggreenfinance..........................................................555.2Futureprioritiesforscalingupgreenfinance...................................................57Annex1:TheFrameworkoftheChineseGreenFinancialSystem..................................60Annex2:SupportingpolicestoGreenFinance...................................................................62Annex3:GreenFinancialProductsandServicesinPilotZones......................................68Annex4:Greenfinanceregulations/initiativesthatapplytoChineseoutboundinvestment/BRI.......................................................................................................................714ForewordInrecentyears,Chinamadesignificantprogressindevelopingitsgreenfinancialsystemthroughaseriesofmeasures,suchasintroducinggreenfinancestandards(suchastaxonomies)anddisclosurerequirements,innovatinggreenfinancialproducts,andlaunchingregionalpilotprograms.Asofnow,Chinahasestablishedoneoftheworld’slargestgreenfinancialmarkets,withtheoutstandingbalanceofgreenloansexceedingRMB10.6tnin2019andthetotalissuanceofgreenbondsamountingtooverRMB1.1tnbetween2016and2019.Significantenvironmentalandclimatebenefitshavebeenachievedthroughtheallocationofpublicandprivatecapitaltoavastnumberofgreenprojectswiththemesonenvironmentalremediation,renewableenergies,energyefficiency,andgreentransportation.Also,China’sregionalpilotprogramshavedemonstratedclearlythatthedeploymentofgreenfinancecouldboosteconomicandjobgrowthatthesametimewhiledeliveringcleanerairandwaterandreducingcarbonemissions.Chinahasplayedaleadingroleintheareaofgreenandsustainablefinanceandactivelypromotedinternationalcollaboration.Since2016,Chinahasco-chairedtheG20GreenFinanceStudyGroup(GFSG),co-foundedtheNetworkforGreeningtheFinancialSystem(NGFS),launchedtheGreenInvestmentPrinciples(GIP)withinternationalpartners,initiatedtheGlobalGreenFinanceLeadershipProgram(GFLP),activelyparticipatedintheInternationalPlatformforSustainableFinance(IPSF),anddevelopedvariousbilateralcollaborativemechanismswiththeUK,FranceandEurope.China’sexperienceishighlyrelevanttoothercountries,especiallyotherdevelopingcountries.Overthepastyears,severalhundredgreenfinancespecialistsandofficialsfromover50countrieshavevisitedChinaundertheGFLPtoexchangeknowledgeandbestpracticesongreenfinance.Followingtheseknowledgeexchangeprograms;Mongoliaestablishedthecountry’sfirstgreenfinancetaxonomywithtechnicalassistancefromTsinghuaGreenFinanceCenterandChinaGreenFinanceCommittee.SomeothercountrieslikeKazakhstanandPakistanarealsoexploringsimilarmeasures.Despiteitssignificantprogress,Chinastillhasalongwaytogoinmeetingthevastandrapidlygrowingfinancingandinvestmentdemandfromits5greeneconomy.Chinawillneedtodeveloponfouraspects:amorecompletesetofgreenfinancestandardsthatcoverallgreenfinancialproducts;mandatoryrequirementsforenvironmentalandclimateinformationdisclosure;strongerincentivesforgreeninvestments;andinstitutionalcapacitytoanalyzeenvironmentalandclimaterisksinaforward-lookingmanner.ChinesePresidentXiJingping’srecentpledgethatChinawouldachievecarbonneutralitybefore2060willbeahugeboosttobothsupplyofanddemandforgreenfinanceinChinaandwillbetranslatedintomorespecificactionsbythefinancialregulatorsandfinancialinstitutions.TsinghuaGreenFinanceCenterwasinclosecollaborationwiththeBCETeamatGIZChinainpreparationofthisreport,whichaimstoprovideanoverviewofChina’seffortssince2016indevelopingitsdomesticgreenfinancialsystemandsomeoftheinternationalinitiativestowhichChinahasmadesignificantcontributions.WebelievethatsomeofthelessonsandexperiencesfromChina--assummarizedinthisreport--especiallyintheareaofpolicycoordination,incentivesandstandards,arehighlyvaluabletoothercountriesthatintendtodeveloptheirowngreenfinancialmarkets.61.OverviewofGreenFinanceinChinaTheearliestlabeledgreenfinancialproductsinChinaweregreenloans,whichdatebackto2012whenChinaBankingRegulatoryCommission(CBRC)issuedtheguidelinesforgreenloans5andlaterstatisticalsystem6in2013.Priortothisinitiative,environmentalissueslikeairpollution,waterpollution,andlandcontaminationhadalreadybeenanationalconcernforboththepublicandthegovernment.TheMinistryofEnvironmentalProtection(nowMinistryofEnvironmentandEcology,MEE)founditnecessarytoapproachtheseissuesfromthefinancialside,inadditiontotheirregulationsonpreventingandcontrollingpollutions.TheguidelinesforgreenloanslearnedfromtheInternationalFinanceCorporation’spracticesandmethodologiesonsustainablebanking.In2014,airpollutionwasgettingworseinurbanChina,especiallyaroundBeijingandTianjininNorthernChina,andthetightenedenvironmentalregulationshadbeenineffective.Someeconomistsandexpertsfoundintheirstudiesthattherootcauseforthesevereenvironmentalpollutionoriginatedintheeconomicstructure(i.e.itsrelianceonhigh-emissionheavyindustry,roadtransport,andenergymix).Tosolvetheenvironmentalissueseffectively,amid-to-longtermsystemicapproachwouldhavetobetaken,includingtotransformintoserviceandconsumptiondrivenindustries,tobuildrailwaysandtrainstoreplaceroadtransport,and,mostimportantly,toreducecoalintheenergymixandincreasetheshareofclean/renewableenergy.Theblueprintwasclear;however,thebigquestionwashowmuchdoesthistransformationcostandwheredoesthemoneycouldcomefrom.InthebookTheEconomicsofAirPollutioninChina:AchievingBetterandCleanerGrowth,Dr.MaJuncalculatedthatthefinancingdemandforgreentransformationinChinawouldbearoundRMB4Trillion(app.USD563billion)annuallybetween2016and2020,andthatthepubliccouldonlyprovide10%to15%ofthefundsneeded.Mostofthefinancinggapwouldhavetobefilledbytheprivatesector.5http://www.cbrc.gov.cn/chinese/home/docDOC_ReadView/127DE230BC31468B9329EFB01AF78BD4.html6http://www.cbrc.gov.cn/chinese/home/docView/F0E89A3240984465BFEF1E3D01316D5B.html7Inspiredbyinternationalgreenbondsissuanceandgreenprojectsfinanceexperience,thePeople’sBankofChina(PBOC)thoughtChinacouldapplysimilarsystemsandthereforeestablishedtheGreenFinanceCommitteeundertheChinaSocietyforFinancingandBanking.Thecommitteewasmandatedtoleadtheresearchontheroleoffinancialmarketsandthepossibilityofestablishingacomprehensivegreenfinancialmarket.TheCommitteewaschairedbyDr.MaJun,thenChiefEconomistoftheResearchBureauofthePBOC.In2014,theCommitteeprovidedasetofrecommendationstopromotegreenfinance,mostofwhichwereacceptedbythetopChinesedecisionmakersintheCentralPartyCommittee(CPC)andtheStateCouncil,andwereincludedintheIntegratedReformPlanforPromotingEcologicalProgress7,releasedin2015.Inarticle45ofthisreformplan,“establishingagreenfinancialsystem”wasraisedasasolutiontopromoteecologicalprogressandamandatetothePBOCforimplementation.InDecember2015,theCommitteereleasedtheChinaGreenBondEndorsedProjectCatalogue(2015)8,thetaxonomyusedforgreenbondsissuedinChina’sinterbankmarketbyfinancialinstitutions(mainlybanks)andinstockexchangesbylistedcompanies.In2016,China-basedinstitutionsissued58labeledgreenbondsinbothdomestic(53)andoverseas(5)markets,withatotalvalueofRMB240Billion(app.USD34.5Billion),accountingformorethan40%oftheglobalissuance(USD81Billion).Chinabecametheworldlargestgreenbondmarketalmostovernight.Sincethen,Chinahasremainedthetopplayerintheworldgreenbondmarket,withitsfinancialinstitutionsexpandingtheirgreenbondissuancesglobally,especiallyinEurope.Asoftheendof2019,thetotalvalueofgreenbondsissuedbyChineseinstitutions,since206,exceedsRMB1.1Trillion(USD155Billion).Withthesegreenloansandgreenbondsissued,enormousenvironmentalbenefitshavebeenrealizedthroughthegreenprojectsthey’vesupported.StatisticsfromCBRC9showedthatbyendofJune2017,projectsandservicessupportedbygreenloanshaveabated491milliontonsofcarbon7http://english.www.gov.cn/policies/latest_releases/2015/09/22/content_281475195492066.htm8http://www.greenfinance.org.cn/displaynews.php?id=4689ThisisthelatestdatawecouldfindfromtheofficialwebsiteoftheCBRC.http://www.cbrc.gov.cn/chinese/home/docView/DE802BF64F754BBE8168B85ECBF629A3.html8emission,whichequatestothetotalemissionsof70,000taxisrunninginBeijingfor336years.Atthesametime,theNon-PerformingLoans(NPL)ratioofthesegreenloansstoodat0.37%,muchlowerthantheaveragelevelof1.69%.Bytheendof2019,theoutstandingvolumefrom21majorbankstotaledmorethanRMB10Trillion(USD1.4Trillion),accountingformorethan10%oftotalloansontheirbalancesheet.AstheenvironmentalbenefitsbecamevisibleandtheairqualityinmajorChinesecitiesimproved,boththegovernmentandthefinancialsectorrealizedthatgreenfinancewascontributingtothesepositiveoutcomesandshouldbefurtherencouraged.Againstthisbackground,thePBOCworkedwithsixotherministriesandjointlyreleasedtheGuidelinesforEstablishingtheGreenFinancialSystem10in2016,whenChinawastheG20President.ThisaddsamorecomprehensivepolicyframeworktotheexistingmandateforgreenfinanceinChina.Manycorrespondingpoliciesandproductswereintroducedsubsequently,includingtheenvironmentaldisclosurerequirement,greeninsurance,greenfunds,andthepilotzoneforpromotinggreenfinanceinlocalgovernments.Chinahasbuiltaninduciveenvironmentforinternationalcollaborationingreenfinancebysupportingtheinternationalclimateagendaandadheringtoitscommitmentsinreducingcarbonemissions.Themaincausesofclimatechange-humanactivities,overrelianceonfossilfuels,etc.-arealsothemaincontributorstoChina’senvironmentalissues.Whenaddressingairpollutionissues,Chinaisactuallyalsoaddressingclimatechange.Inturn,anybestpracticesforclimatechangemitigationandadaptationcanalsobebeneficialtoaddressingenvironmentalissuesinChina.Therefore,Chinahasbeenveryactiveininternationalcollaborationinbothclimatechangeandenvironmentalissues,suchastheNetworkforGreeningtheFinancialSystem(NGFS),theInternationalPlatformforSustainableFinance(IPSF),ParisAgreement,UNSustainableDevelopmentGoals(SDGs),ISO,etc.Againstthisbackdrop,thereistremendouspotentialforChina,Germany,andtheEUtoworktogethertotacklecommonchallenges.ThisreportwillpresentinmoredetailprogressandupdatestothegreenfinancialmarketsinChina,theecologicalcivilization,aswellasthepolicyframeworkanditsstakeholders.Thelatterpartofthisreportwilldigmoredeeplyonothertopicsandissues,includinginternationalcollaboration.10http://www.pbc.gov.cn/english/130721/3133045/index.html91.1GreenFinancialProductsandMarketThissectionofthereportprovidesanoverviewofthedevelopmentofgreenfinancialproductsandmarketsinChina,includinggreencredits/loans,greenbonds,greeninsurance,greenfunds,andotheremergingproductstosupportgreenandsustainableprojectsorservices.GreenCreditsSincetheintroductionoftheGuidelinesforGreenCreditsin2012andthestatisticalsystemin2013,greencreditshavebeengrowingveryfastamongbankinginstitutions.StatisticsfromtheCBIRCshowthattheoutstandingbalanceofgreencreditsfromthelargest21banks11inChinamorethandoubledfromRMB4.85Trillion(USD675Billion)inJune2013tomorethan10.6Trillion(USD1.5Trillion)in2019.Withanaverageannualgrowthrateof14%,greencreditsgrowmuchfasterthantheaverageloans.Inthemeantime,thequalityofgreencreditsremainshighdespitetheirfastgrowth.From2013to2018,theNPLratioofgreencreditsinthesebankswere0.32%,0.20%,0.42%,0.49%,0.37%and0.42%,respectively,wellbelowtheNPLratioofallloansinthesameperiod.12Table1.1Greencreditbalanceof21largestcommercialbanksinChina(TrillionRMB)11ItisimportanttonotethattheCBIRCisonlyaskingthesebankstoreportstatisticsongreencreditsastheyaccountforover80%ofallChinesebanks’assetsandaremorecapableofimplementingtheseguidelines.The21largestbanks,alsodefinedas21nationalcommercialbanks,arelistedbelow:ChinaDevelopmentBank,theExport-ImportBankofChina,AgriculturalDevelopmentBankofChina,IndustrialandCommercialBankofChina,AgriculturalBankofChina,BankofChina,ChinaConstructionBank,BankofCommunications,ChinaCiticBank,ChinaEverbrightBank,HuaxiaBank,ChinaGuangfaBank,PingAnBank,ChinaMerchantsBank,ShanghaiPudongDevelopmentBank,IndustrialBank,ChinaMinshengBank,HengfengBank,ChinaZheshangBank,ChinaBohaiBank,andPostalSavingsBankofChina.Othersmallerandregionalbanksarealsoopentodotheirownstatisticsbutarenotincludedinthenationaldata.12WangXinetal.,ProgressReportonChina’sGreenFinanceDevelopment[R]Beijing:ChinaFinancialPublishingHouse.2019:7610Source:CBIRCAmongthe21banks,ChinaDevelopmentBank,IndustrialandCommercialBank,AgriculturalBankofChina,ChinaConstructionBank,andBankofChinaarethemostactivegreencreditissuers,accountedforover60%ofthetotalgreencreditbalancein2018.Table1.2GreenCreditBalanceat2018end,bybanksSource:CBIRCandCSMAR11Toencouragethedevelopmentofgreencreditsbybanks,thecentralbank,localgovernments,andcommercialbankshaveintroducedvarioussupportingfactors.Forexample,thePBOCincludedtheperformanceofgreenfinanceintomacro-prudentialassessment(MPA)system,wherebankswithahigherratioofgreencreditsonitsbalancesheetandarecentrecordofissuinggreenbondswouldgainextrapointsintheMPAassessment.Ifabankperformswellonotherindicatorsaswell,itwillenjoyahigherinterestratefordepositswiththePBOC.LocalgovernmentssuchastheHuzhougovernmentintroducedsubsidiesforgreenloansbasedongreenness.Forexample,a12%subsidyoftheinterestwillbeprovidedtotheloanforadarkgreenproject(e.g.thegovernmentsubsidizes60pbsforaloanextendedat5%(12%5%)toadarkgreenproject).Thesubsidiesforaveragegreenandlightgreenprojectsare9%and6%,respectively.Manycommercialbanksalsointroducedinternalpoliciesandstrategiestopromotegreencredits.Theseincludethecreationofastandalonegreenfinancedepartment,allocationofmoreresourcestosupportgreenfinance,innovationingreenfinancialproducts,andembeddingmoreEnvironmental,SocialandCorporateGovernance(ESG)elementsintothedecision-makingprocess,amongotherthings..GreenBondsThegreenbondmarketinChinastartedin2016aftertheintroductionofthetaxonomybyChinaGreenFinanceCommitteeintheyearprior.Inthefirstyear,29institutionsissued53greenbondswithatotalvalueofRMB240Billion(USD34.5Billion),accountingformorethan40%oftheglobalissuance(USD81Billion).Amongtheissuers,commercialbankswerethelargestbyissuingRMB150Billion(USD21.5Billion),accountingfor62.5%.Mostofthefundsraisedwereusedtosupportprojectsinrenewableenergyandpollutionprevention.Overnight,Chinabecametheworld’slargestgreenbondmarketandhasremainedasatopplayerintheworld,accountingformorethan20%oftotalglobalissuance.Inthemeantime,manyChinesefinancialinstitutionsissuedgreenbondsinEuropeanfinancialmarkets.ThetotalvalueofgreenbondsissuedbyChineseinstitutionsexceededRMB1.1Trillion(USD155Billion)between2016and2019,includingthoseissuedindomesticandoverseasmarkets.Asteadyuptrendcanbeseeninboththeannualamountandthe12numberofgreenbondsissuedbyChineseinstitutions,showingincreasingactivitiesintheChinesegreenbondmarket(Table1.3).Mostofthegreenbondsaretradedon3markets:ShanghaiExchange,Shenzhenexchange,andtheInterbankmarket.Allgreenfinancialbondsareissuedandtradedviatheinterbankmarket,whileallthegreencorporatebondsareissuedandtradedineitherShanghaiExchangeorShenzhenExchange.GreencorporatebondsissuedbyStateOwnedEnterprises(SOEs),however,aremostlyissuedandtradedontwomarketssimultaneously:theinterbankmarketandoneoftheexchanges.Table1.3AmountandNumberofgreenbondsissuedbyChineseinstitutionssince2016Source:CBIandXinhuaGreenBondDatabaseToencouragegreenbondsissuing,somelocalgovernmentsinChinaintroducedpolicyincentivestocoververificationcostsorcouponrates.Forexample,JiangsuProvinceintroducedanincentiveschemein2018bycovering30%ofgreenbondsfacialinterestswithacapofRMB2Million(USD280,000)forissuersbasedintheprovince13.ThePBOCalsoincludedtheperformanceofbankinginstitutionsintheMPAassessmentframework(i.e.issuanceofgreenbondsduringtheassessmentperiod).13http://czt.jiangsu.gov.cn/art/2018/10/10/art_51172_7836535.html13Ofthegreenbondsissuedinthedomesticmarket,thevastmajority(morethan85%)receivedthird-partyverificationfollowedbyreportsontheuseofproceeds.Thistrendcontinuedgrowingasmoreissuersunderstoodthatinvestorswouldwanttoconfirmthattheirfundswereusedtosupportgreenprojects.LargeverifiersincludeE&Y,LianheEquator,ChinaBond,andCECEP;theseverifierscoverednearly60%ofcertifiedgreenbondsinChina.Thereareafewquestionsconcerningthemarketingreenbonds.OnequestionisthatChinahasmorethanonetaxonomyforgreenbonds,includingthegreencatalogueissuedbyChinaGreenFinanceCommittee(GFC)andtheonedevelopedbytheNationalDevelopmentandReformCommission(NDRC),whichcouldgiverisetotogreen-washingrisks.Thoughtherisksexist,theyare,inouropinion,minimal,asthevastmajority(95%)ofgreenbondsissuedinthedomesticmarketfollowedtheGFCcataloguewhileonly5%adoptedtheNDRC’sdefinition.TheotherquestionisaboutthedifferencebetweentheGFC’sgreenbondstandardsandinternationalstandards,includingtheGreenBondPrinciples,theClimateBondStandards,andtherulesusedbyMultilateralDevelopmentBanks(MDBs).Thedifferenceprimarilyliesintherecognitionofthecleanutilizationoffossilfuels,especiallycoal,intheGFC’scatalogue.TheGFC’scatalogueincludedcleancoalprojects,becauseitsoriginalpurposewasthree-fold:addressingenvironmentalpollution,climatechangeadaptationandmitigation,aswellasimprovingenergyefficiency.CleancoaltechnologywasabletosignificantlyreducetheemissionsofpollutantssuchasSOx,CO,NOx,anddusts,butthecarbonemissionsremained,asaresultmanyhavearguedthatcleancoalneedstobeexcluded.Asthegreenbondmarketcontinuestodevelop,boththemarketandpolicymakersrealizedtheimportanceofharmonizinggreenbondtaxonomiesinChinatoavoidmisunderstandingandmitigatetherisksofgreen-washing.Toattractinternationalinvestors,Chinaalsoneedstoaligndomesticstandardswithinternationalpractice.InlateMay2020,thePBOCreleasedanupdatedversionoftheChinaGreenBondEndorsedProjectCatalogue(2020)forpublicconsultation.ThisupdateexcludedcoalandfossilfuelsfromthelistofeligibleprojectsforgreenbondsinthedomesticmarketandharmonizedthestandardsfromtheGFCandNDRC.Atthesametime,withthesupportfromtheGFC,thePBOChasbeenworkingwiththeDGFISMA14throughtheInternationalPlatformforSustainableFinance(IPSF)14,tocompareandharmonizethestandardsbetweenChinaandtheEUtofacilitateinternationalgreencapitalflows.GreenInsuranceChinahasbeenpilotingenvironmentalpollutionliabilityinsuranceinsomehigh-riskindustriessince2008.BytheendofJuly2019,therewere31environmentalpollutionliabilityinsurancepilotprovinces(autonomousregionsandmunicipalities),involvingover20high-environmental-riskindustries.15In2018,theenvironmentalpollutionliabilityinsurancerealizedapremiumincomeofRMB0.309Billion,andprovidedariskprotectionofRMB326.58Trillion.Significantprogresshasbeenmadebuttheinsurancepenetrationisstillataverylowlevel.Therefore,theChinesegovernmentpassedtheCompulsoryEnvironmentalPollutionLiabilityInsurance(CEPLI)Regulation16inMay2018.TheRegulationrequiresanybusinesstobuyCEPLIifitisinvolvedinhazardouswaste,tailingreservoirs,petroleumproducts,coalmining,metalores,chemicalrawmaterials,chemicalproducts,andotherindustriesdefinedbythegovernmenttorepresentmajorenvironmentalrisk.Ifabusinessfailstocomplyafteracertainperiod,thegovernmentwillpublishthenamesoftheseenterprisesandpenalizethem.Intermsofthescopeofcoverage,CEPLIcoversthird-partybodilyinjury,third-partypropertydamage,ecologicalenvironmentdamage,emergencyhandling,andcleanupexpenses.Innovationsingreeninsuranceproductshaveoccurredinthepastfewyears,wherelocalgovernmentsandinsurancecompaniesplayaproactiverole.In2018,theWestCoastNewDistrictGovernmentofQingdao,Shandongprovincetookoutapublicareaenvironmentalpollutioncleanupexpenseinsurancefora13.05km2industrialenterpriseclusterareawithinitsjurisdictionthroughpublicbidding.Thisinsurancehelpedthegovernmentmakeearlycompensationforthird-partysoilandwaterharmlesstreatmentincurredbyenvironmentalpollutionevents,third-partypropertylossesandexpensesincurredbyemergencyrescues.TheCPICstoodoutfromthefour14https://ec.europa.eu/info/sites/info/files/business_economy_euro/banking_and_finance/documents/200325-international-platform-sustainable-finance-factsheet_en.pdf15ResearchBureauofPBOC,ChinaGreenFinanceProgressReport2018[R]Beijing:ChinaFinancialPublishingHouse.2019:17516http://www.mee.gov.cn/xxgk2018/xxgk/xxgk15/201805/t20180507_630147.html15companiesinthepublicbidding,offeringtheinsuranceatapremiumofRMB450,000peryear.ThetotalinsuredamountisRMB20Million(USD2.8Million),includingRMB6Million(USD0.8Million)fortheseawater.CPIC,astheinsuranceserviceprovider,wouldconductoveralltrackinganalysistotheareaandevaluatethearea’ssafety.CPICwouldalsoimplement2-3timesofon-siteriskmanagement,spotpotentialrisksandproposecorrectionsuggestionstoassistgovernmentdepartmentsroutineregulatorywork.TofacilitatethedevelopmentofthegreenbuildingmarketinChinaandtransformgreendesignstooperationsofgreenbuildings,BeijingsignedwithPICCChina’sfirstgreeninsurancecontractinMarch201917foranindustrialupgradingprojectinChaoyangDistrictasapilotprojecttoensuregreenperformanceofacommercialbuilding.Throughthisinsurancecontract,PICCwillensuregreenperformanceofthisbuildingasdesignedandattractprivateinvestorsonmarket-basedconditions.Lessthantwoweekslater,anothergreeninsurancecontractwassignedinQingdao,ShandongProvince,forsecuringultra-lowenergyperformanceofeightresidentialbuildingsintheSino-GermanyEcoPark18.GreenFundsInChina,government-supportedinvestmentfundareplayingaleadingroleinthecountry’scapitalmarketdevelopment.Bytheendof2018,therewere16government-fundedgreenindustrialinvestmentfundsregisteredintheCreditInformationRegistrationSystemofNationalGovernment-FundedIndustrialInvestmentFunds.ThesefundshaveatargetofraisingRMB29.64Billion(USD4.2Billion)andanactualcapitalcontributionofRMB9.16Billion(USD1.3Billion).ThesefundsaremainlydistributedinBeijing,Shanghai,Shanxi,InnerMongolia,Hebei,Anhui,andYunnan,andprimarilyinvestinecologicalgovernance,energyconservationandenvironmentalprotection,cleanenergy,culture-orientedtourism,greenindustries,etc.Green-themedprojectsareprioritizedingovernments’developmentagenda.Therefore,manylocalgovernmentshaveestablishedgreenindustryinvestmentfunds.Intermsofthethreemainoperationmodes,thereareparent-subsidiaryfund,follow-upinvestment,anddirectinvestment.Exitingtheinvestmentcanbeimplementedbyeithermaturityliquidationorequity17http://bj.people.com.cn/n2/2019/0328/c82840-32784518.html18http://www.sgep.cn/index.htm16transfer.Fortheinvestedgreenprojects,investorscanwithdrawfromthemarketthroughequitytransfer,equityrepurchaseorequityconvertiblebonds.Box1TheSilkRoadGreenIndustryFundTheSilkRoadGreenIndustryFund,originatedfromXi’anChanbaEcoregion,isatypicalcaseofgovernment-supportedgreenindustryinvestmentfund.AsthefirstnationalecoregioninNorthwesternChina,Xi’anChanbaEcoregionhascontinuouslypromotedgreenandlow-carbondevelopment;greenindustriesarecoreproductivityandcompetitivenessforChanba.InMay2016,ChanbaestablishedtheXi’anFinancialHoldingsCo.,Ltdtobuildupagreenfinancebusinessplatform.In2017,withthestrongsupportfromXi’anChanbaEcoregion,Xi’anFinancialHoldingssetuptheSilkRoadGreenIndustryFund(hereinafter“theSilkRoadFund”)withatotalassetundermanagementofRMB10Billion(USD1.4Billion).Theinitialraisedfunds,amountingtoRMB3Billion(USD424Million),bygovernmentfinancialcontribution,greenbondsissuances,andfollow-upinvestments,aimtoguidesocialcapitalintogreenfundraising.Thefundtargetedmainlyatgreenandenvironmentalprotection,high-techindustriesandmodernserviceindustries,andoperatesintwoways:sub-fundsanddirectinvestment.Thefundcouldestablishlimitedpartnershipindustrysub-fundswithothersocialcapitalandfinancialinstitutions,whichiscalledamarketizationmode;ordirectlyinvestintoequitiesofmajorgreenindustriesprojectswithinXi’anChanbaEcoregion.Multiplemethodscouldbeusedtowithdrawfromthefund,includingM&A,IPO,buybacks,equitytransfer,etc.Apartfromthese,theSilkRoadFundalsoexploredanewinvestmentmodeofgreenfunds.InDecember2018,theSilkRoadFund,asalimitedpartner,investedintheKKPGlobalImpactFundestablishedbytheworld’sleadingprivateequityinvestor-KohlbergKravisRoberts&Co.(KKR).Differentfromtraditionalfundswhichonlyfocusonthefinancialbenefitsofprojects,thisfundassessestheenvironmentalandsocialimpactsoftheprojectasthekeycriterionforinvestmentdecision-making.Theseinvestmentsalsoprimarilyfocusonindustrieshelpfultosolvecurrentenvironmentalandsocialproblems,suchasindustrialsolutions,environmentalmanagement,nextgenerationenergy,productionandconsumptionimprovement,developmentoflearningresourcesandhumanresources.ThisfundisthefirstESGthemedfundofKKR.Atthemarketlevel,in2018,CSRChasapproved10publicfundstobelistedinthemarket,theyarethemedwithgreen,lowcarbon,environmentalprotection,newenergy,etc.Bytheendof2018,thereare1,872privatefundsinvestedinenvironmentalprotectionequipment,engineering,andserviceindustries,withthefundscaleofRMB810.45Billion(USD114.4Billion).Therearefour“socialresponsibility”investmentfundsthatcanbecounted(ETFanditsfeederfundaredeemedasone),withtotalAssetsUnderManagement(AUM)ofRMB7.52Billion(USD1.06Billion).Thereare48fundswhosenamehassuchwordsaslow-carbon,environmental17protection,green,newenergy,beautifulChina,andsustainable,withtotalAUMofRMB24.49Billion(USD3.46Billion).Mostrecently,China’sNationalGreenDevelopmentFundhasbeenestablished19inJuly2020,withatotalregisteredcapitalofRMB88.5billion(aboutUSD12.66billion).JointlylaunchedbytheMinistryofFinance,theMinistryofEcologyandEnvironmentandShanghaiMunicipality,thefundwillraisecapitalforinvestmentfieldssuchaspollutioncontrol,ecologicalrestoration,afforestationofnationalland,conservationofenergyandresources,greentransportation,andcleanenergy.ThisFundwillbeoperatedasafundoffundsandtheinvestmentprioritiesatearlystagewillbealongtheYangtzeRiver.1.2GreenFinanceandEcologicalCivilizationOverthepastfewdecades,China’spollutionissues,especiallyairpollution,havebroughtseverehealthandeconomicconsequences,makinggovernmentsrealizetheunsustainabilityofitsoldeconomicgrowth,andbegintoraisegreendevelopmenttoanationalstrategiclevel.InApril2015,theCPCCentralCommitteeandtheStateCouncildeliberatedtheOpinionsonAcceleratingtheEcologicalCivilizationConstruction20,pointingouttheneedto“collectivelypromotenew-typeofindustrialization,applicationofinformationtechnologies,urbanization,agriculturalmodernizationandgreening”andputtingforwardtheconceptof"greening"forthefirsttime.InOctoberofthesameyear,theCPCCentralCommittee’sProposalforFormulatingthe13thFive-YearPlanforNationalEconomicandSocialDevelopment(2016-2020)wasapproved,elevatinggreendevelopmenttounprecedentedimportanceasoneofthefivecoredevelopmentconcepts:“innovation-drivendevelopment,balanceddevelopment,greendevelopment,opendevelopment,anddevelopmentforall.”Sincethen,greendevelopmentandenvironmentalprotectionhavebeenatoppriorityofChina'seconomicdevelopment.Tofundamentallyaddresstheenvironmentalproblems,thegovernmentneedstoestablishaseriesofincentivesandregulatorymechanismstoreallocateresources,includingthecapital,technology,humanresources,andothers,intocleanandgreenindustriesfrompollutingones.Duringthisprocessofresourcereallocation,greenfinanceplaysavitalrolesinceother19http://www.xinhuanet.com/english/2020-07/16/c_139215364.htm20http://www.gov.cn/xinwen/2015-05/05/content_2857363.htm18resourceswillfollowthecapitalintogreenindustries.AsshowninthestudybyCCICED,China'sgreeninvestmentdemandwasassessedtobearoundRMB3-4Trillionperyearbetween2015-202021.Itwasalsoestimatedthatupto15%ofthegreeninvestmentdemandcanbemetbypublicfunds,andmorethan85%ofthegreeninvestmentdemandmustrelyonmarket-basedfinancing.Consequently,callsforthegovernmenttoestablishagreenfinancepolicyframeworkthatenablesthefinancialmarkettomobilizemoresocialcapitalintogreenindustriesintensified.InSeptember2015,TheCPCCentralCommitteeandtheStateCouncilissuedtheIntegratedReformPlanforEcologicalProgress,which,forthefirsttime,explicitlystatedthatChinashouldestablishagreenfinancialsystemincludingdevelopinggreencredit,greenbonds,greendevelopmentfunds,andsoon.Box2BeijingtoBuildtheInternationalGreenFinanceCenterInFebruary2019,theStateCouncilauthorizedthePilotProgramtofurtherOpen-uptheServiceSectorofBeijingMunicipality,includingtheplantobuildaninternationalgreenfinancecenter.ThePlanencouragesthereformandinnovationofgreenfinance,thedevelopmentofgreenfinancialinstruments,environmentalrightstransactionssuchasemissionrights,waterrights,andenergyrights,andsupportforeigninvestorstoparticipateingreenfinanceactivities22.Toimplementthisplan,theBeijingGovernmenthasdevelopedanambitiousagendatobuildinstitutionalcapacityandupgradeitsinfrastructureforgreendevelopment.Inarecentmoveshowingthesignificanceofthisagenda,BeijingistransformingitslocalcarbonexchangetoChina’sfirstgreenassetexchangetoattractdomesticandinternationalcapitaltoengageintradingofgreenassetssuchasgreenbonds,greenasset-backedsecurities(ABS),greenprojectfinancing,carbonemissionrights,etc.23Asoneoftheinstitutionalarrangementstosupporttheinternationalgreenfinancecenter,theBeijingInstituteofFinanceandSustainability(BIFS)hasbeenestablishedinApril2020.BIFSaimstomakesubstantivecontributionstotheUnitedNationsSustainableDevelopmentGoalsandtheParisAgreementastheleadingChina-ownedinstitute,aswellasanefforttosupporttheambitionofBeijing’sInternationalGreenFinanceCenter.ThemissionofIFSistoharnessChineseexpertiseingreenfinanceandsustainabledevelopmenttocontributetothecollectiveeffortforgreenandlow-carbondevelopmentintherestoftheworld,especiallyalongtheBeltandRoad.1.3PolicyFrameworkandStakeholders21https://www.iisd.org/sites/default/files/publications/CCICED/economics/2015/green-finance-reform-and-transformation.pdf22http://www.gov.cn/zhengce/content/2019-02/22/content_5367708.htm23https://www.paulsoninstitute.org/green-finance/green-scene/beijing-poised-to-be-first-international-green-finance-center-in-china/19InAugust2016,withtheapprovaloftheStateCouncil,thePBOCandsixotherministriesandcommissionsjointlyissuedtheGuidelinesforEstablishingtheGreenFinancialSystem(hereafterasGuidelines(2016)),whichrepresentedtheinitialformationofChina'sgreenfinancialpolicysystemandwasalsotheworldfirstcompletenationalpolicyframeworktosupportgreenfinance.In2017,thePBOC,alongwithotherrelevantministriesandcommissions,agreedonthedivisionoflabortoimplementtheseactionssetoutintheGuidelines(2016)andmadeatimetableandroadmapforestablishingthegreenfinancesystem.Gradually,issue-specificpolicieswereformulated,suchaspoliciesongreencredits,greenbonds,environmentalinformationdisclosure,greenfunds,greeninsurance,andenvironmentalrightstradingmarkets.Inthefollowingsections,thegreenfinancialpoliciesintroducedinChinawillbepresentedforeachgreenfinancialproduct,includinggreencredits,greenbonds,greeninsurance,greenfunds,andothers,togetherwithinformationonstakeholdersinvolvedintheprocess.GreenCreditsThebeginningofChina’sgreencreditpoliciescanbetracedbackto2007,whenthegreencreditpolicywasjointlyissuedbytheMinistryofEnvironmentalProtection(nowMEE),PBOC,andCBRC(nowCBIRC).Itinitiallysetoutthatthebanklendingshouldflowtowardsgreenprojectsandawayfrompollutingandenergy-intensiveprojects.Since2012,asthebankingregulator,theCBRChasperformedakeyroleindevelopingandenforcingapolicypackageofgreencredits:theGuidelinesonGreenCreditin2012elevatedthegreencreditstoastrategicheightbyrequiringtheboardofdirectorsorthesupervisoryboardofbankstoassumetheresponsibilitiesofitsgreencreditdevelopmentstrategy;ThebirthofGreenCreditStatisticsSystem24in2013andtheKeyPerformanceIndicators25in2014meantCBRC’sgreencreditsystemmovedintoaphasewherethegreencreditperformanceofbankswasmeasurableandsupervised.AftertheGuidelines(2016)wasissued,thePBOChastakenonalargerroleinestablishingincentivesandthemonitoringandevaluationsystemforgreencredits.Asthecentralbank,thePBOChastakenstepstocombine24http://www.cbrc.gov.cn/chinese/files/2014/501344F75C984C158551B648F971B241.pdf25http://zfs.mee.gov.cn/hjjj/gjfbdjjzcx/lsxdzc/201507/t20150716_306812.shtml20greenfinancewithmacro-prudentialandmonetarypolicies.In2017,thePBOCincorporatedgreencreditsandgreenbondsofmajornationalfinancialinstitutionsintothemacro-prudentialassessment(MPA).InJune2018,thePBOCdecidedtoincludehigh-qualitygreenloansascollateralsinthemedium-termlendingfacility(MLF).Asformonitoringandevaluation,in2018,thePBOCrefinedtheevaluationcriteriaforthegreencreditperformanceofbanks26andexpandedthescopeforallbankingfinancialinstitutionsinChina27.AsthemainregulatorybodiesoftheChinesebankingsector,boththePBOCandCBRCplaycrucialrolesinregulatinggreencredits.Asthecentralbankresponsibleforfinancialstability,thePBOChasaleadingroleindevelopingincentivesforgreencreditslinkedwithMPAandmonetarypoliciesandinestablishingabankingevaluationsystemforgreencredits.TheCBRCisresponsibleforformulatingtherulesandregulationsgoverningthebankingandinsurancesectorsinChina28,includingtheregulationsofgreencreditsforbankinginstitutions.Table1.4illustratesthemainstakeholdersandtheirresponsibilitiesingreencreditpolicies.Table1.4KeyStakeholdersingreencreditpoliciesTypeofstakeholdersMainStakeholdersRolesandResponsibilitiesRegulatorsPBOCEstablishinggreencreditmonitoringandevaluationsystems,anddesigningMPAandmonetarypoliciesincorporatedwithgreenfinance.CBRCEstablishingandsupervisingthegreencreditsystemforthebankingsector.MarketParticipantsCommercialProvidinggreencreditproductsforborrowers.26http://www.pbc.gov.cn/tiaofasi/144941/3581332/3730193/2018122910413376572.pdf27PBOCisresponsiblefortheperformanceevaluationofgreencreditfor24majordepositfinancialinstitutionsinthebankingindustry;anditsShanghaiheadquarters,branches,operationofficesandbranchesinthecapitalcitiesofprovincesareresponsiblefortheperformanceevaluationofgreencreditfordepositfinancialinstitutionswithinitsjurisdiction.28CBIRCalsoconductsexaminationsandoversightofbanksandinsurers,collectsandpublishesstatisticsonthebankingsystem,approvestheestablishmentorexpansionofbanks,andresolvespotentialliquidity,solvency,orotherproblemsthatmightemergeatindividualbanks.21Banks29Third-partyparticipantsAssurancefirmsVerifyingbanks’environmentalandsocialrisks.GreenBondsSincethefirstissuanceofgreenbondsin2015,Chinahasbecomeakeyplayerintheglobalgreenbondsmarketandiscurrentlyoneoftheworld’slargestissuers30.Officially,thepromulgationofthreenationalregulatorydocumentsongreenbonds,namelyAnnouncementonissuesrelatedtotheissuanceofgreenfinancebonds(PBOC)(hereafterasGreenBondNotice2015)31,theGreenBondIssuanceGuidelines(NDRC)32,andGuidingOpinionsonSupportingtheDevelopmentofGreenBonds(CSRC),arethefoundationsforChina’sgreenbondmarket33.Amongthem,GreenBondNotice2015ofPBOCisthefirstgreenbondsguidanceinChina.Astheregulatoroftheinter-bankbondmarket,PBOCdraftedthisdocumentforgreenfinancialbonds,withdetailsondefinitions,issuers’supervision,administrationanddisclosurerequirements,andtheeligibilitycriteriaforgreenprojects34.TheGreenBondIssuanceGuidelinesfromNDRCcontaineddetailedrequirementsofissuanceandkeysupportingareasforgreenenterprisebonds.Italsostreamlinedtheapprovalproceduresandencouragedlocalgovernmentstoofferincentives.AfterconductingpilotprogramsofgreencorporatebondsintheShanghaiandShenzhenStockExchanges,theCSRCfinallyissuedtheofficialguidingopinions,GuidingOpinionsonSupportingtheDevelopmentofGreenBonds,whichprovidedanoverarchingregulatoryframeworkforgreenbondstradingthroughthestockexchanges.ShortlyaftertheenforcementofCSRC’sguidingopinions,theNationalAssociationofFinancialMarket29CommercialbanksinChinagenerallyrefertostate-controlledbanks,joint-stockcommercialbanks,citycommercialbanks,ruralcommercialbanks,ruralcooperativebanks,urbancreditcooperatives,ruralcreditcooperatives,villagebanksandforeignfundedbanks.30https://www.climatebonds.net/files/reports/china-sotm_cbi_ccdc_final_en260219.pdf31http://www.gov.cn/xinwen/2015-12/22/content_5026636.htm32https://www.ndrc.gov.cn/xxgk/zcfb/tz/201601/t20160108_963561.html33http://www.csrc.gov.cn/pub/newsite/flb/flfg/bmgf/fx/gszj/201805/t20180515_338154.html34GreenBondEndorsedProjectCatalogue(2015)22InstitutionalInvestors(NAFMII)issuedguidelinesonthegreennoteofnon-financialenterprises35.Agraduallyenablingregulatoryenvironmentforgreenbondshasthusbeencreatedbythesegovernmentalbodies.Assummarizedintable1.5,differentproductsaretradedindifferentmarketsunderdifferentregulators.ThePBOCandCSRCaretheregulatorsoftheinter-bankbondmarketandexchange-tradedbondmarket,respectively.Withthescale-upofChina’sgreenbondmarket,theneedforprofessionalservicesfromthird-partyagenciesisalsoincreasing.Toencouragetheseagencies’participation,inOctober2017,thePBOCandtheCSRCjointlyissuedtheGuidelinesfortheConductofAssessmentandCertificationofGreenBonds36,whichstandardizedthequalification,businessundertaking,contentsoftheevaluationandcertification,andthemanagementofthethird-partycertificationfirms.Table1.5AsummaryofChina’sbondmarketstructureInter-BankBondMarketExchange-TradedBondMarketMajortypesofbondproductstradedChinatreasurybonds,bondsissuedbyPBOC,policybankbonds,financialbonds,enterprisebonds,commercialpapers,mediumtermnotes,localgovernmentbonds,andasset-backedsecuritiesTreasurybonds,localgovernmentbonds,enterprisebonds,corporatebondsandconvertiblebondsKeymarketparticipantsCommercialbanks,insurancecompanies,mutualfunds,securitycompanies,foreigninvestorswithRenminbiQualifiedInstitutionalInvestor(RQFII)statusCommercialbanks,insurancecompanies,mutualfunds,securitycompanies,foreigninvestorswithQualifiedInstitutionalInvestor(QFII)orRQFIIstatus,corporationsandindividualinvestorsRegulatorsPBOCCSRCTypesofdebtinstrumentscommonlyseenandthe•Chinatreasurybonds:issuedbyMinistryofFinance•CentralBankBonds:issuedbyPBOC•Policybankbonds:issuedby•Treasurybonds:issuedbyMinistryofFinance•Localgovernmentbonds:issuedbylocalprovincesorcities35http://www.nafmii.org.cn/ggtz/gg/201703/t20170322_60431.html36http://www.csrc.gov.cn/pub/newsite/gszqjgb/gzdtgszj/201712/P020171225392695761548.pdf23issuersChinapolicybanks•Financialbonds:issuedbycommercialbanksandotherfinancialinstitutions•Non-financialcreditbonds:issuedbystate-ownedorstate-heldentitiesandcorporates•Localgovernmentbonds:issuedbylocalprovincesorcities•Foreignbonds:issuedbyforeignentities•Enterprisebonds:issuedbygovernment-related,state-ownedorstate-heldentities•Corporatebonds:issuedbylistedcompanies•Convertiblebonds:issuedbylistedcompaniesSource:China’sBondMarket,CSOPAssetManagement37EnvironmentalInformationDisclosureIntheGuidelines(2016),thedivisionofdisclosureplanalsohasbeenmadeclear:Chinamustestablishamandatoryenvironmentalinformationdisclosuresystemforlistedcompaniesinthreegradualsteps:requiredisclosureformajoremissioncompanies(2017);requiresemi-mandatorydisclosureforalllistedcompanies(2018);andexpandmandatoryrequirementstoalllistedcompanies(2020).Theimplementationofthisdisclosureplanhasbeencarriedoutasscheduled.In2017,theMEEestablishedthelistofkeypollutingcompaniesandrequiredthesecompaniesandtheirsubsidiariestodisclosetheirenvironmentalinformation38.Inthesameyear,theCSRCrevisedthedisclosurerequirementsofannualreportsandsemi-annualreportsforlistedcompanies39.Itrequireslistedcompaniesonthelistofkeypollutingunitstodisclosetheirenvironmentalinformationandotherlistedcompaniestofollowtheprincipleof“complyorexplain”.InSeptember2018,theCSRCrevisedtheCodeofCorporateGovernanceforListedCompanies40,whichpointedoutthelistedcompaniesshoulddisclosecorporatesocialresponsibility(CSR)information,includingenvironmentalinformation.Furthermore,themandatoryrequirementsforalllistedcompaniestodiscloseenvironmentalinformationareestimatedtocomeoutbytheendof2020,37http://www.csopasset.com/en/education/china_bond38http://www.mee.gov.cn/gkml/hbb/bgt/201712/t20171201_427287.htm39http://www.sse.com.cn/lawandrules/regulations/csrcannoun/c/4444089.pdf40http://www.csrc.gov.cn/pub/csrc_en/laws/rfdm/DepartmentRules/201904/P020190415336431477120.pdf24signalingtheinitialestablishmentofamandatorysystem.Table1.6summarizesthemajorstakeholdersandtheirresponsibilitiesinenvironmentalinformationdisclosure.Table1.6KeyStakeholdersinenvironmentalinformationdisclosurepoliciesTypeofStakeholdersMainStakeholdersRolesandResponsibilitiesRegulatorsCSRCDesigningdisclosurestandardsforlistedcompanies.MEEEstablishingthelistofkeypollutingcompaniesandmonitoringtheirenvironmentalactivities.MarketparticipantsListedcompaniesDisclosingenvironmentalinformationinpublic.Third-partyparticipantsAssurancefirmsVerifyinglistedcompanies’financialandenvironmental(non-financial)informationdisclosure.GreenFundsBasedongovernmentinvolvement,greenfundscanbeclassifiedintothreetypes:government-backedgreenfunds,PPP(Public-PrivatePartnership)greenfunds,andpurelymarket-basedgreenfunds(includingprivategreenfundsandpublicgreenfunds).Asemphasizedintheprevioussection,government-backedgreenfunds,nowplayinganactiveroleinthecapitalmarket,havebeenvigorouslydevelopedbytheChinesegovernment.In2011,theStateCouncilhasissuedguidelinestoencouragethedevelopmentofgreenindustrialfunds.Sincethen,severalregionalorindustry-specificgreenfundshavebeensetupbygovernments,suchastheEco-CityConstructionFundofTianjinandNewEnergyIndustryFund.InJuly2020,supportedbytheMinistryofFinance,theMinistryofEcologyandEnvironmentandShanghaiMunicipality,China’sNationalGreenDevelopmentFundwasputintooperation.Theestablishmentofthefund,whichaimstofocusonkeyareasofgreendevelopmentalongtheYangtzeRiverEconomicBelt,willinjectnewimpetusintothecountry'secologicalprogress.RegardinggreenPPP,asearlyas2015,theMinistryofFinance,NDRC,andPBOCjointlypromulgatedguidanceonpromotingthePPPmodelinthe25fieldofpublicservice41,whereinenvironmentprotectionandenergyefficiencyarepartsofpublicserviceareas.In2017,thesethreedepartmentsthenissuedacirculartoregulateandpromoteassetsecuritizationofPPPprojectsfurther42.Formarket-basedgreenfunds,inNovember2018,theAssetManagementAssociationofChina(AMAC)formulatedGreenInvestmentGuidelines43toestablishbasicprinciplesandstandardsforgreeninvestmentmethodologies,strategies,regulations,benchmarks,andevaluations.Nevertheless,theguidelinesaremerelyvoluntaryforgreeninvestmentpractices.Table1.7presentssignificantstakeholdersandtheirresponsibilitiesingreenfundpolicies.Table1.7KeystakeholdersingreenfundpoliciesTypeofstakeholdersMainStakeholdersRolesandResponsibilitiesRegulatorsMinistryofFinanceEstablishingandregulatingthegovernmentalgreendevelopmentfundsystem.NDRCIndustrialassociationAssetManagementAssociationofChina（AMAC）Providingvoluntaryguidelinesforgreeninvestments.GovernmentalinvestorsCentralandlocalgovernmentsEstablishingandoperatingcentralorlocalgreendevelopmentfundsMarketinvestorsInstitutionalandnon-institutionalinvestors(e.g.,assetmanagers)Investingpublicorprivategreenfundproducts.GreenInsuranceUnderthenarrowdefinition,greeninsurancereferstoenvironmentalpollutionliabilityinsurance(EPLI)44.Underthebroaddefinition,therearealsomanyinnovationsingreeninsurance,suchasthepublicareaenvironmentalpollutioncleanupexpenseinsuranceandgreenbuilding41http://www.gov.cn/zhengce/content/2015-05/22/content_9797.htm42http://www.csrc.gov.cn/pub/newsite/gszqjgb/gzdtgszj/201706/t20170627_319194.html43http://www.amac.org.cn/industrydynamics/guoNeiJiaoLiuDongTai/jjhywhjs/esg/202001/P020200120441036297434.pdf44Environmentalpollutionliabilityinsurancecoverstheeconomiccompensationliabilitiesarisingfromthepersonalinjuries,fatalitiesorpropertylossescausedtothirdpersonsbycorporatepollutionincidents(PBOC&UNEP,2015).26insurancediscussedintheprevioussection.Inthepastdecade,China’sgreeninsurancepoliciesareprimarilyfocusedonEPLI.Asearlyas2007,ChinabegantoexploretheestablishmentofapolicysystemforEPLI45andlaterlaunchedpilotprograms.Moreregulationshavebeenenforcedtoimprovethispolicysystemandregulatepilotprogramssincethen46.Afteryearsofeffort,thesepilotprogramshavemadeprogressbutremainintheinitialstageofdevelopmentwithproblemsandchallenges.Thesechallengesincludealackoflegalsupportatanationallevel,lowcostofpollutionviolationsduetoweaklawenforcementforinfringementliabilities,inconsistentstandardsforindemnitiesforenvironmentalpollutiondamages,andinadequateincentivemechanismforenvironmentalpollutionliabilityinsurance.Inthiscontext,therewasaneedtodevelopasystemofcompulsoryenvironmentalpollutionliabilityinsurance(CEPLI).BoththeOverallReformPlanfortheEcologicalCivilizationProgress(2015)andtheGuidelines(2016)statedthegoalofestablishingaCEPLIsystem.In2018,theCIRC,togetherwiththeMinistryofEnvironmentalProtection,passedtheCompulsoryEnvironmentalPollutionLiabilityInsuranceRegulation47.ThisregulationrequiredanybusinesstobuyCEPLIifinvolvedinindustriescontainsmajorenvironmentalrisksasdefinedbythegovernment.Otherwise,itwouldreceiveapenalty48.However,sincethattheEnvironmentalProtectionLawofthePeople’sRepublicofChinastipulatesthat,“theStateencouragesparticipationinenvironmentpollutionliabilityinsurance,”theregulationstillhaslimitedenforceabilityuntilnow.Table1.8presentssomemajorstakeholdersandtheirresponsibilitiesingreeninsurancepolicies.Table1.8KeystakeholdersingreeninsurancepoliciesTypeofstakeholdersStakeholdersRolesandResponsibilitiesRegulatorsMEERegulatingthegreeninsurance45ThedocumentherereferstotheGuidingOpinionsonEnvironmentalPollutionLiabilityInsurance,jointlypromulgatedbytheformerStateAdministrationofEnvironmentalProtectionandtheCIRCin2007.46Forexample,theMinistryofEnvironmentalProtectionandtheCIRCjointlypromulgatedGuidingOpinionsonImplementingthePilotProgramsofCompulsoryEnvironmentalPollutionLiability(MEP[2013]No.10Document)inearly2013.47http://www.gov.cn/xinwen/2018-05/08/content_5289087.htm48ThegovernmentwillpublishthenamesoftheseenterprisesthatfailtoapplyCEPLIafteracertainperiodandpenalizethemwithafineofuptoCNY30,000.27system.CBIRCMarketParticipantsInsurancefirmsProvidinggreeninsuranceproductsEnvironmentalRightsTradingMarket49In2011,theStateCouncilissuedtheWorkPlanforControllingGreenhouseGasEmissionsduringthe12thFive-YearPlanPeriod,whichcalledfor“exploringtheestablishmentofacarbonemissiontradingmarket”.Inthesameyear,theNDRCagreedtocarryoutpilotschemesofemissiontradingmarketsinGuangdongandHubeiprovincesandfivecities(Beijing,Tianjin,Shanghai,Chongqing,andShenzhen).Thesepilotschemeshavesimilaritiesbutvaryintheirapproachtoissues,suchasthesectorcoverage,allowanceallocation,priceuncertaintyandmarketstabilization,thepotentialmarketpowerofdominatedplayers,offsetusages,andenforcementandcompliance(Zhang,2015)50.Afteryearsofpractice,thepilotcarbonmarketshaveaccumulatedsomeexperiencesintechnologyandcapacitybutalsoidentifiedshortcomings,suchasalackofsufficientsupportingmechanismsforpilotcarbontradingsystems,immatureandinflexiblecarbonquotaallocationschemes,andalackofmarketliquidityandinadequatecarbonpricing.Basedontheexperiencesandlessonslearnedfrompilotprograms,inDecember2017,theNDRCissuedProgramfortheEstablishmentofaNationalCarbonEmissionsTradingMarket(PowerGenerationIndustry)51,signalingthecompletionofChina’soveralldesignofcarbonmarketandtheinitiationofitsnationalcarbonemissiontradingsystem(ETS).ThepowergenerationindustrybecamethegroundzeroofthenationalETS.TheNDRCalsooutlinedathree-stageroadmapforthedevelopmentofanational-levelcarbonmarket:stageoneisaone-yearpreliminaryconsultationperiodforthedevelopmentoflawsandregulationsonthemanagementofthenational49Theenvironmentalrightstradingmarketreferstothecarbonemissiontradingmarketinthisreport.50Source:ZhongxiangZhang(2015)CarbonemissionstradinginChina:theevolutionfrompilotstoanationwidescheme,ClimatePolicy,15:sup1,S104-S126,DOI:10.1080/14693062.2015.109623151https://www.ndrc.gov.cn/xxgk/zcfb/ghxwj/201712/t20171220_960930.html28ETS52;stagetwoisaone-yearsimulatedoperationperiod;stagethreeistheperiodofperfection.Afterthereleaseoftheroadmap,regulatorsacceleratedtheprocesstobuildthemarketinfrastructure.Forexample,inApril2019,theMEEissuedandconductedthepublicconsultation53of“MeasuresfortheAdministrationofCarbonEmissionTrading,”54thefirstlegislativedocumentonETSafterthelaunchofChina’snationalcarbonmarket.Otherregulatorydocumentsinareassuchasquotaallocationandcarbonaccountingalsograduallycameintoeffect55.Table1.9summarizesmajorstakeholdersandtheirresponsibilitiesinChina’sETSsystem.Table1.9KeystakeholdersinenvironmentalrightstradingmarketTypesofstakeholdersMainStakeholdersRolesandResponsibilitiesRegulatorsMinistryofEcologyandEnvironmentEstablishingthenationalcarbontradingmarketsystem56.MinistryofFinanceRegulatingaccountingstandardsforcarbontrading.MarketparticipantsEnterpriseswithhighenvironmentalrisksBuyingandsellingpermitsandcreditstoemitcarbondioxide.Third-partyparticipantsVerificationfirmsOfferconsultingandverifyingservicesintheprocessofMeasurement,ReportingandVerification(MRV).52Inthisstage,foursupportingsystemsareplannedtoestablish:thenationalcarbonemissionregistrationsystem,thenationaldatareportingsystem,thenationaltradingsystemandthenationalsettlementsystem.53TheprocessofsolicitingpublicopinionsisaprerequisitefortheStateCouncil'srelevantlegislativeprocedure.54http://www.mee.gov.cn/hdjl/yjzj/wqzj_1/201904/t20190403_698483.shtml55Forexample,theMEEsetthelistofkeypollutant-dischargingunitsinthepowergenerationindustryanddraftedtrailquotaallocationschemesforpowergenerationindustryin2019.TheMinistryofFinanceissuedtheNoticeofIssuingtheInterimProvisionsontheAccountingTreatmentRegardingCarbonEmissionsRightTradingtoprovidecarbonaccountingtreatmentguidelinesinDecember2019.56TheStateCounciltransferredthemajortasksofestablishingthecarbontradingmarketsystemfromtheNDRCtotheMEEduetotherestructuringofgovernmentdepartmentsin2018.29Besidesthelistedpolicies,regulatorsarestillimprovinggreenfinancepoliciesinthesementionedaspectsandexploringgreenfinancewithinnewareas.Thisreportwillcontinuetotracknewdevelopmentsandtrendsofgreenfinancialpoliciesandkeepupdated.302.NationalTaxonomiesforGreenFinancialAssets2.1GuidelinesforGreenCreditsandStatisticsTheearliestgreenbankingpolicyinChinawasfrom199557,however,thecomprehensivedevelopmentofgreenbankingpolicyframeworkonlystartedin2012.Sincethen,greenbankinghasgrownrapidlyinChina,mostlythankstoits“top-down”approach.Thekeytothissuccessisthebankingregulator’sall-roundtop-levelplan,inwhichallkeyelementsareincluded,fromguidelinesandclassificationstandards,tostatistics,performanceevaluation,monitoring,andincentivepolicies.In2012,theCBRCissued“GuidelinesonGreenCredit”asaprogrammaticdocumentforgreenbanking.The“GuidelinesonGreenCredit,”forthefirsttime,proposedthreekeyframeworksofgreencredit,namelyenvironmentalandsocialriskmanagement,greenfinancialproductsinnovation,andenvironmentalfootprintsofthebanks.Meanwhile,the“GuidelinesonGreenCredit”dividedtheimplementationschemeintofivemodules:organizationandmanagement,policysystems,capacitybuilding,processmanagement,internalcontrolandinformationdisclosure,andmonitoringandsupervision,givingclearandactionablerequirementsforbankinginstitutionstofollow.58In2017,ChenYulu,DeputyGovernorofthePeople'sBankofChina,pointedoutthattopromotethedevelopmentofgreenfinance,itisneededto“increasethetransparencyofgreenfinancialmarket,strengtheninformationdisclosurerequirements,establishpublicenvironmentaldataplatform,raisethegreenfinancialproductstandards,improvegreenratingandcertification,andbuildenvironmentalstresstestingsystem,soastobreakthebottleneckofgreeninvestmentandfinancingcausedbyinformationasymmetry,effectivelyrestrictpollutinginvestment,andprevent‘greenwashing’risk."5957PBOC,“NotificationonStrengtheningEnvironmentalProtectioninCreditBusiness”,February1995.http://www.pkulaw.cn/fulltext_form.aspx?Db=chl&Gid=057dbd5f63dfccb6bdfb&keyword=%E4%B8%AD%E5%9B%BD%E4%BA%BA%E6%B0%91%E9%93%B6%E8%A1%8C%E5%85%B3%E4%BA%8E%E8%B4%AF%E5%BD%BB%E4%BF%A1%E8%B4%B7%E6%94%BF%E7%AD%96%E4%B8%8E%E5%8A%A0%E5%BC%BA%E7%8E%AF%E5%A2%83%E4%BF%9D&EncodingName=&Search_Mode=accurate&Search_IsTitle=058YEYanfeietal.,ThoughtsonGlobalGreenCreditDevelopmentTrend[J].ChinaBanking.2017(1):26-28.59GFC,ChenYulu:fiveaspectstoenhancetheattractivenessofgreenfinancialmarket,April2017,http://www.greenfinance.org.cn/displaynews.php?id=84331Intermsofgreenbankingclassificationstandards,theCBIRCandPBOCconfirmedunifiedgreencreditstandardsin2013and2018,thatgreencreditswouldsupportthemanufacturingloansforthreestrategicemergingindustries(energysavingandenvironmentalprotection,newenergy,andnewenergyautomobile),andsupportedloansfor12typesofenergysavingandenvironmentalprotectionprojectsandservices(Figure2.1).60In2019,aftertheissuanceof“GuidingCatalogueofGreenIndustries(2019)”withsevenministriesincludingtheNDRC,thePBOCandCBIRCadjustedthegreencreditclassificationstandardsandissuedconsultationpaperonrevisionstotheirrespectivegreencreditstatisticalsystemtoestablishmorescientificanddynamiccreditclassificationstandardsTheCBIRCgreencredittaxonomystartedfrom2013topromoteenergysavingandemissionsreductions.ThePBOCgreencreditstartedin2018tosupportthe“GuidelinesforEstablishingtheGreenFinancialSystem.”TheCBIRCgreencredittaxonomyrequires21majorcommercialbankstoreporttheirgreencreditdataeverysixmonths,andthestatisticalindicatorsmainlyincludegreencreditbalance,changeinbalance,5-categoriesloanclassification(Normal,concerned,subprime,doubtful,loss),energysavings,andemissionsreductions.ThePBOCgreencredittaxonomyrequiredmajordeposit-takingfinancialinstitutionstoreporttheirgreencreditdataonaseasonalbasis,andthestatisticalindicatorsfocusongreenloans,whichareenergysavingandenvironmentalprotectionprojectsandservicesloan,andloansfromenterpriseswithgreatenvironmentalandsafetyrisks.Figure2.1China’sGreenCreditTaxonomy60CBRC,“NotificationonReportingGreenCreditStatistics”,July2013.32Source:ChinaBankingandInsuranceRegulatoryCommissionTheCBIRCprovidedenvironmentalbenefitscalculationmethodsforvariousindustriesandcorrespondingcalculationtools.Thebanksarerequiredtocalculateandreporttheenvironmentalbenefitsforindividualloans.OnthePBOCside,thestatisticsdepartmentreceivesandanalyzesthedataandself-inspectionreportsubmittedbymajorbanks,whilelocalofficesreceivematerialsreportedbycorporatefinancialinstitutionsintheirjurisdictions.Thedataandreportsaresubmittedquarterly,andthestatisticalindicatorsalsoconsiderloanusage,loanquality,andtheindustryoftheloan.Inthegreenfinancepilotareas,thePBOCusesacreditmanagementinformationsystemtoidentifyanddocumentgreenloanbusinesses,makingthedataandrecordstraceableandverifiable,loweringgreen-washingriskswiththehelpofFintech.Table2.1EnvironmentalbenefitsofmajorbanksinChina33ReportingdateVolumeofenergysavingandemissionsreduction(intons)standardtonofcoalequivalentCO2eCODNH3-NSO2NOXsavedwater2017.6.30215,095,946490,563,9652,834,517267,6434,645,2533,131,057715,006,525Source:ChinaBankingandInsuranceRegulatoryCommission2.2CatalogueofGreenBondEndorsedProjectsInDecember2015,theGreenFinanceCommittee(GFC)ofChinaSocietyofBankingandFinancereleasedtheCatalogueofGreenBondEndorsedProjects(2015),whichwasthenendorsedbythePBOCasthenationaltaxonomyofgreenbondissuedbyfinancialfirms.ShanghaiandShenzhensecuritiesexchangesissuedrespectiveguidelinesforcorporate-issuedgreenbondsinearly2016byfollowingtheGreenBondCatalogueaswell.TheGreenBondCatalogueacceptedsixeligiblecategoriesofgreenbonds,including:EnergySaving,PollutionPreventionandControl,ResourceConservationandRecycling,CleanTransportation,CleanEnergy,andEcologicalProtectionandClimateChangeAdaption.TheGreenBondCataloguemakesanumberofimportantchangestothemarket,including:1)Limittheproceedsofgreenfinancialbondstogreenassetsandprojects;2)Providerulesonproceedsallocationincludingring-fencing,earmarking,andinvestmentsallowedbeforetheallocation;3)Requirerobustenvironmentalinformationdisclosure;4)Encourageissuerstoarrangeanindependentpartytorevieworcertifythebondintermsofitsuseofproceedsandenvironmentalperformance.InMay2020,PBOC,CSRCandNDRCjointlypublishedtheupdatedCatalogueofGreenBondEndorsedProjects(2020)61(hereafterasGreenBondCatalogue(2020))forpublicconsultation.ThisupdatedCatalogueisbasedontheGreenIndustryGuidanceCatalogue(2019)issuedbyNDRC.61China'stopregulatorsannouncetheywillexcludefossilfuelsfromtheirgreenbondstaxonomy,CIB,June10,2020.https://www.climatebonds.net/2020/06/chinas-top-regulators-announce-they-will-exclude-fossil-fuels-their-green-bonds-taxonomy-it34Themainupdateinthenewtaxonomyistheexclusionofcoalandnaturalgasproductionandusage.Italsoaddshydrogen,sustainableagriculture,greenconsumerfinance,greenservicesandmanufacturingamongotherenvironmentallyconscioussectors.TheupdatedtaxonomyalsoharmonizedallgreenbondstaxonomiesinChina,regardlessofissuingentities.2.3GreenIndustryGuidanceCatalogueInMarch2019,theGreenIndustryGuidanceCatalogue62(hereafterasCatalogue2019)wasjointlyissuedbyNDRCandothersixministriesandcommissions(MinistryofIndustryandInformationTechnology,MinistryofNaturalResources,MEE,MinistryofHousingandUrban-RuralDevelopment,PBOC,andNationalEnergyAdministration).NDRCwasresponsibleforoveralldevelopmentplanningandstrategysettingandshallalsoberesponsibleforleadingtheplanningforgreeneconomy.TheCatalogue(2019)aimstoclarifytheindustryborders,sothattheothersixministriesandcommissionscanadjustcurrentpoliciesandincentivesaccordingly,andcomeupwithinvestment,pricing,financial,andtaxpoliciesintheirrespectiveareas.TheCatalogue(2019)willalsohelpother6ministriesandcommissionsdesigntheirownsubcataloguestofurthersupportgreenindustrydevelopment.Meanwhile,theCatalogue(2019)callsonministriesandtheirlocaldepartmentstoexchangerelatedworkingexperienceswithdomesticandinternationalpeers,andpromotemutualrecognitionsbetweentheCatalogue(2019)andrelatedinternationalgreenstandards.TheCatalogue(2019)identifiessixcategoriesasgreenindustriesandspecifiesindustrysegmentsforeachcategoryandservesasanimportantbasisforsubsequentpoliciesforgreendevelopment,includingtheconvergenceofothergreentaxonomiesinChina.‐Energyconservationandenvironmentalprotection‐Cleanproduction‐Cleanenergy‐Eco-environment(3second-levelcataloguesand29third-levelcatalogues),‐Greeninfrastructureandreconstruction,and‐Greenservices.62https://www.ndrc.gov.cn/fggz/hjyzy/stwmjs/201903/t20190305_1220625.html352.4HarmonizationofthestandardsHarmonizationofdifferentstandardsandtaxonomieshasbeenunderdiscussionbothinChinaandinternationallyinthepastfewyears.Domestically,priortotheintroductionoftheGreenBondCatalogue(2020),therehadbeentwotaxonomiesforgreenbonds,includingPBOC’sGreenBondCatalogue(2015)andNDRC’sInstructionsforIssuingGreenBonds63fromDecember2015.AlthoughmostofthegreenbondshavebeenissuedbyfinancialinstitutionsandlistedcompanieswhowerefollowingthePBOC’staxonomy,themarketstillneedsaunifiedtaxonomyforgreenbondstoreducecostsandenhanceclarity.Inthemeantime,thetaxonomyforgreenloansissuedbyCBIRC(formerlyCBRC)in2013wasalsodifferentfromthegreenbondtaxonomies,exacerbatingthediscrepanciesinstandardsforgreenfinancialbonds.Inordertoharmonizethesedifferenttaxonomiesissuedbydifferentregulators,thePBOC,CBIRC,CSRC,NDRC,andotherrelevantregulatorsandpolicymakersagreedtointroducetheGreenIndustryCatalogueinMarch2019asanoverarchingcataloguethatcoversallgreenindustries,activities,andproducts.However,thiscataloguewasnotactuallyataxonomy,butacomprehensiveclassificationsystemthatcouldworkasthebasisforfutureupdateandrevisionsoftheexistinggreentaxonomiesthatcovergreencreditsandgreenbonds.Bytheendof2019,thePBOCandtheCBIRChaveincorporatedtheCatalogue(2019)intotherevisedtaxonomyofgreencredits.ThemostrecentupdateoftheGreenBondCatalogue,issuedinMay2020forpublicconsultation,alsofollowedtheCatalogue(2019).Onceformallypublished,thetaxonomiesforgreencreditsandgreenbondsinChinawillbeharmonized.InadditiontotheexistingtaxonomiesandstandardsinChina,therearesomeinternationaltaxonomies,orvariationsbasedonexistingtaxonomies.Forexample,someASEANcountriesadoptedtheGBPwhilealteringafewelementstofittheirlocalcircumstances;MongoliaSustainableFinanceAssociation(MSFA)developeditsnationalgreentaxonomy64withsupportfromChina;TheEUhasbeenworkingtodevelopaunifiedtaxonomyforsustainablefinanceintheEUmarket,coveringallfinancialproductsand63http://fgw.beijing.gov.cn/zwxx_13613/zcfg/qtwj/201912/t20191223_1417228.htm64https://www.ifc.org/wps/wcm/connect/fa534a1e-34a5-49ed-ac09-8fa8e143535f/EN+Framework.+Green+Taxonomy+Mongolia.pdf?MOD=AJPERES36activities.Theneedforcomparabilityandharmonizationamongtheseinternationaltaxonomies,especiallybetweenmajormarketslikeChinaandtheEU,hasbeenobviousinrecentyearstominimizegreen-washingorreputationalriskswhileencouraginginternationalgreencapitalflow.Itisencouragingtoseesomanycountriestakingstepsindevelopinglocalgreenbondmarkets,apivotalsteptomobilizeprivatecapitalforgreendevelopment.However,itispossiblethattoomanydefinitionscouldbeasproblematicastoofew.Differencesandvariationsingreendefinitionsandtaxonomieswouldconcerninternationalinvestors,especiallyforcross-bordergreencapitalflows.Itisimportantandnecessarytocompareandharmonizethedifferentdefinitionsandtaxonomies.Thegoodnewsisthatsomemajormarketsarealreadyconsideringstepsinthisdirection.Forexample,ChinaandtheEUestablishedaworkinggroupundertheIPSFtoexplorethepossibilityandpathwaytocompareandharmonizetheirtaxonomies.Oncecompleted,itwouldnotonlybenefitmarketparticipantsfromChinaandtheEU,butalsobringassurancetoothermarkets.Someopenbutsmallereconomieswithoutallofthegreenindustriescanavoiddevelopingalocalgreentaxonomybysimplyadoptingtheharmonizedinternationaltaxonomytominimizethecostsofdevelopingataxonomy.373.PilotProjectsandRegulatoryPoliciesforGreenFinance3.1PilotProjectsandKeyMilestonesforGreenFinanceWiththeambitiontogreenthewholefinancialsystemandtheexperiencesfromintroducingnewpoliciesthroughpilotprojects,theChinesegovernmenthastakenstepstoannounceafewcitiesasthefirstbatchof“GreenFinancePilotZones”.Themainpurposeistoexplorethepracticalandreplicablesolutionsthatcanhelpscaleupgreenfinanceinawidernationalmarket.Therefore,establishingpilotzonesmarksanimportantsteptowardthegoalofbuildingarobustgreenfinancialsystem.3.1.1Firstbatchofgreenfinancepilotzonesin2017OnJune14,2017,theStateCouncillaunchedpilotzonesforgreenfinancialreformandinnovationineightcitiesinZhejiang,Guangdong,Xinjiang,Guizhou,andJiangxiprovinces.Theselectionofcitiesforpilotzonesconsideredgeographicalfactors,stagesofdevelopment,endowmentforgreendevelopment,andmostimportantly,willingnessoflocalgovernments.Soonafter,thePBOCandothersixministriesjointlyissuedtheplanforimplementationonJune23rd.Theoverallplaninthefiveprovincesfollowthesameconcepts,i.e.innovation,coordination,green,open,andshareddevelopment,aswellasexplorationofdifferentiatedaspectsandprioritiesofgreenfinancewiththeirrespectivecharacteristics.Specifically,eachpilotzonefromthefiveprovinceshadthefollowingcharacteristics:ZhejiangProvinceistheplacewherePresidentXiJinpingpromotedtheconceptof“clearwatersandgreenmountains.”Moreimportantly,itenjoysrichexperiencesindevelopingmicrofinance,inclusivefinanceinthepasttwodecades.HuzhouandQuzhouareappointedastwogreenfinancepilotzonesinZhejiangprovincethataimtoimprovewatermanagementanddevelopecologicalandcirculareconomy.Withthemandatetosupporttransformationandupgradeindustrialstructures,thesetwocitiesalsoseektoacceleratethereformandupgradeitslong-establishedchemicalindustrythroughvariousgreenfinancialpractice.Undoubtedly,amongallgreenfinancepilotzones,Huzhoucityperformedthebestwithfruitfuloutputs,withtheconstructionastatisticalsystemforgreenfinance,anIT-basedgreenfinancingplatform,anda38greenfinanceevaluationstandardsandratingsystemapplicableforgreencompanies,projects,banksandservices.Moreimpressively,asofQ12020,thegreencreditvolumeofHuzhoureached18.75%oftotalfinancialcreditissuedbyinstitutionsinthecity,abovethenational’saverage.InGuangdongProvince,Guangzhouisadynamiccitywithacomplexeconomyandmodernfinancialservices.Itwasaskedtoexploreanewdevelopmentmodel,wheregreenfinancialreformandeconomicgrowthcoincide,withanenablingenvironmentforgreenfinancetosupportadvancedmanufacturingandmodernservices,suchasenergyconservation,environmentalprotection,andnew-energyvehicles.Guangzhouhashadacarbontradingplatformdatingbackto2012andwasappointedasaqualifiedChineseCertifiedEmissionReduction(CCER)tradinginstitutionin2013.Moreover,asGuangzhouisgeographicallyclosetoHongKongandMacao,itisalsogiventhetasktodevelopgreenFintechandgreenfinancemarketincooperationwithHKandMacaocapitalmarkets.InXinjiangregion,Hami,ChangjiPrefecturesandKaramayareimportantcitiesareatthecenteroftheSilkandRoadEconomicBelt.Theyareencouragedtomakethebestoftheircomparativeadvantagesinenergy-related,high-endmanufacturingandenvironment-relatedindustries,andstrengthenfinancialsupporttocleanenergyandmodernagriculture.AsofDecember2019,thegreencreditvolumereachedanaverage10.5%oftotalfinancialcreditissuedbyinstitutionsinXinjiangregion.InGuizhouProvince,Gui’AnNewDistricthassolidfoundationsforgreenindustries,includingsuperiornaturalenvironmentandresources.Gui’Anistoexploreeffectivemodesforgreenfinancetosupportstrategicnewindustriesledbybigdataandpromotetheintegrationofbigdata,theconstructionofecologicalcivilization,andthedevelopmentofgreenfinance.JiangxiProvinceisalsooneofthefirstnationalpilotzonesforecologicalcivilization.GanjiangNewDistrictisastate-leveldistrictwithobviousgeographicalandecologicresourceadvantagesandhasformedgreenindustryclustersasaninitialstep.Ganjianggovernmentisexploring39waysforgreenfinancetosupportthedevelopmentofecologicaleconomyandgreenindustry.Asidefromtheabove-mentionedgreenfinancepilotzones,afewothercities,suchasLanzhouinGansu,Beijing,Shenzhen,Chongqing,andSuzhou,havealsoadvocatedfordevelopingtheirlocalgreenfinancialmarkets.LanzhoufromGansuProvincebecameanapprovednewgreenfinancepilotzoneattheendofDecember2019.Thelocalgovernmentattachesgreatimportanceonreformingandupgradingtraditionalindustryandusingvariousgreenfinancialproductstobuildthelow-carboncirculareconomy.Also,LanzhouhasalsomadeastrategicpartnershipwiththeIndustrialBankforthenext5years,focusingonsupportingthedevelopmentofgreenprojectssuchasspongecity,waterconservationandsupply,andeco-tourism.In2019,BeijingMunicipalgovernmentannounceditsplantobecometheglobalsustainableresearchcenter,aimingtobuildtheinternationalgreenandsustainablefinancehub.Acrucialmovein2019,BeijingEnvironmentExchangebecameChina’sfirstgreenassetsexchange,toattractdomesticandinternationalcapitaltoparticipateingreenassetstrading,suchasgreenbond,carbonpermits,greenasset-backedsecurities(ABS).Inaddition,asadeliverableforthe2019UK-ChinaEconomicandFinancialDialogue,BeijingannounceditsplantohosttheBeijing-LondonGreenTechnologyInnovationandInvestmentCenter.ThekeymandateofthecenteristosupportarangeoftechcompaniesfromChinaandtheUKtofacilitategreeneconomytransitioninbothcountries.Shenzhenhasalsointroducedafewpoliciesandmechanismstoincentivizegreendevelopment.Inthelastdecade,Shenzhenhasgainedrichexperiencesinemissionstrading,asitconsistentlyrankedfirstinmarketliquidityamongthepilots.Moreover,sinceChina’sStateCouncilrecentlyissuedtheOutlineDevelopmentPlanfortheGuangdong-HongKong-MacaoGreaterBayArea(GBA).Greendevelopmentwiththeaidoffinancialtechnologyisbecominganewtrend.TheShenzhenGreenFinanceCommitteeisactivelycollaboratingwithHongKongandinternationalpartnerstomakeeffortstowardecologicalconservation,greendevelopment,andsustainabilitymainfeaturesintheplansfortheGBA.Recently,Shenzhen’slocalgovernmentisattemptingtolegislaterelatedlawsandregulationstoacceleratethedevelopmentofgreenfinance,inwhichisthefirstintheworld.40Moreover,citieslikeChongqingandSuzhou,althoughnotcandidatesforpilotzonesintheshortterm,havealsosoughttoimplementgreenandsustainabledevelopment.3.1.2ExperiencesgainedfordevelopinggreenfinanceinpilotzonesSincetheirformallaunchin2017,thepilotzoneshavebeenmakingprogressontheirmaintasksasscheduled,andanumberofreplicableexperienceshavebeengainedandconsolidated.Thedevelopmentofthosegreenfinancepilotzonesbasicallyfollowsthesamemodel:first,havingtheconsensusgreenfinancedevelopmentstrategyatadministrativelevel;second,usingfinancialandnon-financialincentivestoencouragegreenfinancialproductinnovations.Sincetheestablishmentofthegreenfinancepilotzones,valuableexperiencecanbecategorizedasthefollowing:1)Consolidatinginfrastructureandinstitutionalcapacityisessentialfordevelopinggreenfinance,includinghumanresources,capacitybuilding,informationsystemandetc.Forexample,tofosterknowledgesharingandexchangeamongpilotzones,sinceJuly2018,thePBOChasentrustedHuzhouBanktoleadandorganizeninefinancialinstitutionsfrompilotzonestostudyandbuildgreenfinancialinformationmanagementsystem.Themainfunctionsofthesystemincludedataanalytics,environmentalbenefitmeasurement,off-sitesupervision,peerreview,andinformationsharing.2)Innovativefinancialproductsandservicesarethemostimportantindrivingmarket-basedsustainabledevelopmentofgreenfinance.Amongallprogressthathasbeenmadeingreenfinance,theissuanceofgreencreditisakeyindicatorduetotheimportanceroleofbankinginChina’sfinancialsystem.Thefollowingtableisademonstrationonthescaleofgreenloans.However,inthefuture,variousfinancialinnovationneedtoutilizedtodrivethedevelopmentofgreenfinance,suchasgreenbonds,greenABS.Table3.1GreencreditvolumeinfivepilotsGreenFinancePilotsGreenCredit(AsofDec.2018)Huzhou,ZhejiangProvinceRMB43Billion(USD60Billion)Quzhou,ZhejiangProvinceRMB59.66Billion(USD84.7Billion)41Guangzhou,GuangdongProvinceRMB262.17Billion(USD370Billion)Ganjiang,JiangxiProvinceRMB3.5(USD4.9Billion)Gui’anNewArea,GuizhouProvicneRMB16.06Billion(USD2.27Billion)XinjiangRegionRMB34.3Billion(USD4.86Billion)Source:ChinaGreenFinanceProgressReport,20183)Informationplatformsandself-regulatorymechanismsarethecrucialtogreenratingandtoavoidgreen-washing;Publicenvironmentalinformationdisclosurecanhelpinvestorsincreaseinformationtransparency,minimizeasymmetry,andfacilitatetransactionasaresult.Forexample,Huzhougovernment’sstatisticalsystemforgreenfinanceandIT-basedgreenfinancingplatformhaveproventobenefitfinancialinstitutionsandpublicstakeholdersbyprovidingaccesstokeyinformation.4)Strongincentivesandregulatorypoliciesareneededtosupportthemomentumofdevelopinggreenfinance,includingmonetary,fiscal,andregulatorypolicies.Forexample,almostallpilotzoneshaveintroducedverystrongincentivepoliciestosupporttheinnovationandreformofthegreenfinancialsystems.InJuly2018,Gui’AnNewDistrictreleased“PolicyMeasuresonSupportingtheDevelopmentofGreenFinance",allocatingRMB500Millionthroughgreendevelopmentspecialfundseveryyeartosupportthedevelopmentofgreenfinanceandthegatheringofgreenindustries65.Toattractfinancialinstitutions,localgovernmentpromisedtoprovideuptoRMB20Milliontobanks,securitiescompanies,insurancecompanies,back-officeservicecentersthatsettledin.Toattracttalents,seniorgreenfinancemanagementmemberswouldenjoy50%taxrefundfor10years.Toencouragethedevelopmentofgreenfinancialbusinesses,financialinstitutionswouldbegrantedbyuptoRMB5Millioneachyearbasedontheirperformanceingreencredits,greenbonds,greeninsurance,greenfunds,andothergreenfinancialproducts5)Selectionofkeyareasforreformandinnovationingreenfinancemustconsiderlocalconditions,likeregionaleconomiccharacteristicsandlocalindustrialdevelopmentneeds.Forexample,GuangdonguseditsgeographicadvantageandstrengthenedcooperationwithHongKong65ChinaGreenFinanceProgressReport(2018)42andMacaoindevelopinggreenfinance.OnJuly4th,2018,theFinancialWorkBureauofGuangzhouHuaduDistrictandtheHongKongQualityAssuranceAgencysignedanMoUongreenfinancecooperation,throughwhichtheyjointlyreleasedgreenprojectandgreenenterprisecertificationsystemsthatmetinternationalstandardsandexploredtheformulationofagreenfinancialdevelopmentindex.3.1.3ChallengesaheadAlthoughsignificantprogresshasbeenmadeandvaluableexperiencesgainedfromthepilotzones,theinitiativesandlocalgovernmentsstillfacemanychallenges.First,identifyaclearmandateforeachpilotzone.Peopleneedtobetterunderstandthemissionofreformandinnovationinpilotzonesandencouragethemtoexploremoredeeplyonhowtoinnovatepoliciesandsystemstopromoteasustainablegrowthmodel.Second,requiresolidadministrativefoundationinfacilitatinggreenfinancetransactions.Supportiveservicesandfacilitiesfordevelopinganoperationalandeffectivegreenfinancialmarket,suchasgreenfinancialstandardsandinformationdisclosure,mustbestrengthened.Third,needaconsensusamongdifferentgovernmentalagencies.Effortsatimplementationandpolicylevelsamonggovernmentalagenciesandmarketentitiesmusttobebettercoordinatedtocollaborativelypromotethein-depthdevelopmentofgreenfinance.3.2RegulatoryandIncentivePoliciesforGreenFinanceRegulatoryincentivestosomeextendcanovercomethesechallengesidentifiedaboveandacceleratetheprogressofgreenfinancedevelopment.Withproperincentivesinplace,banksaremoreconfidentwhenadministeringgreenlendingareprojectownersarewillingtobemoreenvironmentallyfriendly.Inthepastdecade,Chinesegovernmentandregulatoryauthoritieshaveintroducedasetofpoliciestoregulateandincentivizebanksandcompaniestosupportgreenprojects.Greenpolicyincentivesrefertothepoliciesthataredevelopedbypublicauthorities(i.e.governments,centralbanks,financialregulators,andsupervisors).Theseintroducedpolicieswillencouragecapitalallocationforgreenprojects,andultimatelyensureenvironmentalandclimate43sustainability.Inthissection,wefurtherdividedthosepoliciesintothreecategories,monetarypolicies,fiscalpolicies,andnon-financialpolicies.3.2.1MonetaryPolicyBydefinition,monetarypolicyingreenfinancereferstothechangesinmoneysupplymadebythecentralbanktoachievemacroeconomicgoalsthatpromotegreenandsustainabledevelopment.People’sBankofChina(PBOC)isthecentralbankinChina.Ithasbeengiventhreemandates:1)planandimplementmonetarypolicies;2)ensuretheoverallstabilityofthefinancialsystem;and3)providefinancialservices.InChina,thePBOChasplayedaleadingandcoordinatingroleamongothergovernmentalagenciestodrivegreenfinancedevelopment.In2016,PBOC,togetherwithothergovernmentalagenciesintroduced“GuidelinesforEstablishingtheGreenFinancialSystem”,makingChinatheworld’sfirstcountrytointroduceanoverarchinggreenfinancepolicy.Furthermore,PBOCalsoactivelyparticipateininternationalgreenfinancecooperation.Inthesameyear,duringChina’sPresidencyinHangzhouG20Summit,thetopicongreenfinancewasfirstraisedinsuchahigh-levelinternationalcooperationplatform.RepresentativesfromPBOCandBankofEnglandareselectedastheco-chairsfortheG20GreenFinanceStudyGroup,andtheresearchworkcontinuedforthesubsequenttwoyearsinGermanyandArgentina.Inlate2017,thePBOCjoinedtheNetworkofCentralBanksandSupervisorsforGreeningtheFinancialSystem(NGFS)asoneofeightfoundingmembers.PBOCischairingthefirstmicro-prudentialworkstream,leadingthechargeondraftingtheworld’smostadvancedenvironmentalriskassessment(ERA)fortheworld’sfinancialinstitutions.ThePBOC’smandateistoensurefinancialstability.Asthebankingsectormakesupforabout91%oftotalunderlyingassetsinChina’sfinancialsystem,toensurethestableliquidityofbankingsectoristhekeyinachievingsustainableeconomicgrowth.Chinaisacountrywithlargepopulationandhugeenergydemand.FossilfuelisthepredominatesourceofenergyinChina,withcoalaccountingfor70%ofChineseenergyproduction.Mostlarge-scaleenergyinfrastructureprojectsarefinancedthroughbankloans.Asclimatepoliciesstrengthenandthepublic’sclimateawarenessincrease,investmentsintraditionalenergysourcesislikelytograduallydecreaseattheglobalscale.Banksarelikelytoexposethemselvesto44strandedassetsandNon-PerformingLoans(NPL)inthefutureittheycontinuetomakehighportionsoflendingtocarbon-intensiveprojects.Inordertoavoidsystemicfinancialrisksposedbyclimatechange,PBOChasintroducedafewmonetarypolicyincentivestoguidemorecapitalflowsintogreenprojectsin4aspects:re-lendingfacility,re-discountingfacility,Macro-PrudentialAssessment(MPA),andeligiblecollateralsrangeexpansion.RefinancingFacilitiesCentralBanksprovideshort-termliquiditytobanksthroughopenmarketoperations.Re-financingtoolsincludeRepofinancing,overnightloans,re-lendingandre-discountfacilities.Globally,thePBOCisoneofthepioneersinutilizingrefinancingtoolstodrivegreenfinancedevelopment.Itencouragestheuseofre-lendingfacilitytosupportsmallenterprise,agriculturefirms,aswellasgreenprojects.Forexample,InJuly2018,PBOCChangjibranchissueditsfirstgreenre-lendingtransactionintheXinjiangregion,withatotalvalueofRMB200Million,tosupportprojectsthatcanreducechemicalfertilizerpollutionandenhancelandproductionefficiency.Ontheotherhand,Re-discountFacilityalsoallowscommercialbankstousegreennotesinexchangeforloansfromcentralbankswhentheyactasthelenderoflastresort.Forexample,PBOCKaramaybranchhasmadeitsfirstgreenre-discounttransactioninJune2018.GreenNotesmakeupabout35%ofatotaledRMB103Millionre-discounttransactions.Micro-PrudentialRegulationMicro-prudentialregulationismandatedtoensurethestabilityofindividualbankanditscustomers.Aseachfinancialinstitutionisincreasinglyawareofthefinancialimpactsstemmingfromenvironmentalandclimateissues,theseissuesmaybecomeasystemicriskifitnotwellmitigatedinadvance.Macro-prudentialregulationsaimtomitigateriskstothefinancialsystemasawhole.Accordingly,thePBOCdecidedtoincludegreenbondsandgreencreditloansintotheMacro-prudentialAssessment(MPA)systemin2016and201766.Bankswithhighportionofgreenloansandissuanceofgreenbondsgetextrapointsandgreaterinterestearningsasaresult.66SustainableFinanceinAsia.http://iigf.cufe.edu.cn/ueditor/php/upload/file/20190917/1568698155140132.pdf45ExpansionontherangeofGreenCollateralsIn2018,thePBOCincludedqualifiedgreenloansandgreenbondsaseligiblecollaterals.Later,thePBOCfurtherexpandedtherangeofeligiblecollateralstoMedium-TermLendingFacility(MLF),Short-termLendingFacility(SLF),andPledgedSupplementaryLending(PSL)67.3.2.2FiscalPolicyInadditiontothemonetaryincentivesfromthecentralbank,localgovernmentshavealsoprovidedasetoffinancialsupportforgreenprojectownersaswellasgreenbanks,includinggrants,subsidies,guaranteeinstitutions,andgovernmentsupportedfund.GrantsGrantsarenon-repayablefundsdisbursedorgivenbyoneparty.Theyareawidelyusedapproachforlocalgovernmentstoincentivizegreenenterprise.Grantshavebeeninstrumentalinpromotinggreenfinancedevelopment.UsingHuzhouasanexample,greengrantsareallocatedintwoways:1)Enterprisesarerewarded1%oftheiractualfinancingamountbythegovernmentatthefinancingstageiftheyarerecognizedasgreenSME.2)AfirmisrewardeduptoRMB500Thousandifithasbeenselectedasbestpracticeingreenfinance.3)Corporateandinsurancecompaniesaresubsidizediftheyareusinggreenfinancialproducts.InterestsubsidiesToencouragemorecompaniestoutilizegreenfinancialproductsinfinancingforandmakinginvestmentsinenvironmentallyfriendlyproducts,governmentsatthelocallevelcanalsoprovideinterestsubsidesinsteadofdeliveringbudgetstraightaway.Forexample,Jiangsugovernmentprovidedupto30%ofinterestsubsidiesforthenon-financialcorporationswhohavesuccessfullyissuedgreenbonds,withnosingularbondexceedingtheamountofRMB2Millioneachyear.Ontheotherhand,Huzhougovernmentdecidedtoprovideinterestsubsidiestothegreenbanksdirectly,banksthatlendtogreentechnologySMEatarelativelowerratecanbecompensatedbygovernmentat1%interestrate.Creditenhancement67SevilAcar,ErincYeldan,(2019),HandbookofGreenEconomics46Manygreenprojectsandinvolvedcompaniesareoftenperceivedtohavehighercreditriskandlackqualifiedcollateralsbyfinancialinstitutions,hinderingtheiraccesstocapitalasmanyofthemarelightinassetsandmightexperiencealongertimebeforehavingcashflows.Insuchcases,insuranceandguaranteemechanismsareimportanttoenhancecreditratings.AfewlocalgovernmentsinChinaalsointroducedgreencreditenhancementmechanismtoscaleupgreenfinancedevelopment.Huzhougovernmentwillcoverupto50%-70%premiumforcreditguaranteefortheidentifiedgreenentities.Government-supportedgreenfundComparedwithindividualinvestmentopportunities,acollectivefundcanbenefitfromabroaderrangeofinvestmentopportunities,greatermanagementexpertise,andlowerfees.Greeninvestmentfundshavethegoaltomeetinvestors’preferencesingreenprojects.InChina,governmentsupportedinvestmentfundsareplayinganimportantroleinitscapitalmarket.AsofDecember2018,governmentsupportedinvestmentfundsreachedRMB200Billion68.Greenprojectsareprioritizedingovernments’developmentagenda,andmanylocalgovernmentshaveestablishedgreenindustryinvestmentfunds.Forexample,HuzhougovernmentcommittedtoestablishgovernmentindustryfundtomobilizeRMB15Billionfromprivatesectortosupportgreenprojects.3.2.3Non-financialincentivesEnvironmentalInformationDisclosureGuidelinesAdequateenvironmentalinformationisneededtoenableconsciousdecisionmakingforstakeholdersinthefinancialmarket.Regulatorscanplayavitalroleinenvironmentaldatasharingastheyhavetheauthorityandcredibilitytoacquire,summarize,anddistributedata.In2008,ChinalaunchedtheGreenSecuritiesPolicy,theenvironmentaldisclosureregulation.Anintegralcomponentofthepolicy,directspubliclytradedChinesecompaniesin14highlypollutingindustriestoreportrequiredenvironmentalinformation.Inthesameyear,theShanghaiandShenzhenStockExchangesmandatedcertainlistedcompaniestodiscloseESGinformationstartinginthefiscalyearendinginDecember2008.In2018,ChinaSecuritiesRegulatoryCommission(CSRC),incollaborationwithChina’sMinistryof68ChinaGreenFinanceProgressReport,201847EnvironmentalProtection,introducednewrequirementsthat,by2020,willmandatealllistedcompaniesandbondissuerstodiscloseenvironmental,social,andgovernance(ESG)risksassociatedwiththeiroperations.Thesepoliciesfunctionasguidelinestoincentivizecompaniestomoreeffectivelydiscloseenvironmentalinformation,facilitatinginvestmenttransactions.EffortstoEnhanceCapacityAlthoughpublicawarenessandwillingnessondevelopinggreenfinancehasincreasedalotinthepastfewyears,manystakeholdersstilllacksufficientcapacity,mainlybecausemostfinancialsectorprofessionalsareunfamiliarwiththeenvironmentalrisksandtheirapplicationstofinance.Providingcapacitybuildingtoolsandtrainings,greenguidelinesandstandardscanincreasethefeasibilityofgreenfinanceinthemarketandshouldbeconvenientforstakeholderstoapplyintheirpractice.Afewgreenfinancecapacitybuildingprogramshavebeeninitiatedbyacademicinstitutionsandconsultingfirmsinthepastfewyears,suchasGlobalGreenFinanceLeadershipProgram(GFLP)andSyntaoGreenFinance.Thesecapacitybuildingprogramslargelyprovideanopportunityforgovernmentofficialsandfinancialprofessionalstounderstandgreenfinancepoliciesandtheuseofgreenfinancialproducts.Table3.2CollectionofmostpopularincentivepoliciesTypesofIncentivesExamplesMonetaryIncentivesRe-lendingInJuly2018,PBOCChangjibranchissuedgreenre-lendingtransactionwithatotalvalueofRMB200millionRe-discountingInJune2018,PBOCKaramaybranchhasmadeitsfirstgreennotesre-discounttransactionMacro-PrudentialAssessment(MPA)GreenbondandgreencreditloansarewrittenintotheMacro-prudentialAssessment(MPA)systemin2016and2017respectivelyExpansiononcollateralsIn2018,thePBOCincludedqualifiedgreenloansandgreenbondsaseligiblecollateralsFiscalIncentivesGrantsGreenSMEinHuzhoucanget1%ofitsactualfinancingamountfromthegovernmentInterestsubsidiesJiangsugovernmentwillcoverupto30%ofinterestsubsidiesforthenon-financialcorporates48Huzhougovernmentdecidedtoprovideinterestsubsidiestothegreenbanksat1%interestrate.CreditenhancementHuzhougovernmentcancoverupto50%-70%insurancefeeGovernment-supportedgreenfundHuzhougovernmentcommittedtoestablishaRMB15BilliongovernmentindustryfundNon-FinancialIncentivesEnvironmentalInformationDisclosureGuidelinesGreenSecuritiesPolicy(2008)ShanghaiStockExchangeandShenzhenStockExchange(2008)ESGdisclosurerequirments(2018)fromCSRCandMEECapacityBuildingGreenFinanceLeadershipProgram(GFLP)Source:GFLP,SyntoGreenFinance,2019494.InternationalInitiativesandCollaborationChinahasactivelyparticipatedoreventakentheleadinmanyglobalinitiativesongreenfinanceinrecentyears.Itsstrongpresenceofnational,sub-national,andinstitutionalplayersenablesChinatolearnfromworld-leadingpracticesandsharetheperspectivesofadevelopingcountrythatfacescriticalenvironmentalanddevelopmentalchallenges.ChinaledthecreationoftheG20GreenFinanceStudyGroupandwastheoneoffoundingmembersoftheCentralBankandSupervisor’sNetworkforGreeningtheFinancialSystem.ChinahasincorporatedgreenfinanceintobilateraleconomiccooperationaswellastheBeltandRoadInitiative.4.1Co-chairingtheG20GreenFinanceStudyGroupIn2016,ChinainitiatedtheGreenFinanceStudyGroup(GFSG)duringitsG20Presidency.Thegroupwasco-chairedbythecentralbanksofChinaandtheUK,featuringgreenfinanceintheG20agendaforthefirsttime.Thegroupsustainedthrough2017and2018,underthepresidencyofGermanyandArgentina,whileco-chairedbyChinaandtheUK.Initsfirstyear,theGFSGtookthestockofexistinggreenfinancialtools,identifiedmarketandinstitutionalbarriersforthedevelopmentofgreenfinance,andproposedsevenoptionsformembercountriestoconsideronvoluntarybasis,whichcoveredgreencredits,greenbonds,institutionalinvestors,riskanalysis,andmeasurementofprogress.TheserecommendationswerewelcomedbyG20leadersattheHangzhouSummitinSeptember2016andwrittenintoaseriesofofficialdocuments,bringinggreenfinancetowiderinternationalattention.ThemomentumcontinuedinthefollowingtwoyearsunderGermanyandArgentina’sG20Presidencies.Thetopicsin2017includedEnvironmentalRiskAnalysis(ERA)andPubliclyAvailableEnvironmentalData(PAED)thatsupportssuchriskanalysisandinformsdecision-making.In2018,theGFSGwasrenamedasSustainableFinanceStudyGroup(SFSG)toadheretotheframeworkofSDGsandputforwardthreemainrecommendationsforthefinancialsector:creatingsustainableassetsforthecapitalmarket,developingsustainablePE/VC,andapplyingdigitaltechnologytosustainablefinance69.69UNEPInquiry.(2018).https://unepinquiry.org/g20greenfinancerepositoryeng/504.2ParticipatingintheNGFSasaFoundingMemberTheG20GFSGisanimportantmilestoneforChina’scontinuousengagementintheglobaldialogue.InDecember2017,eightcentralbanksandregulators,includingthePBC,collectivelyformedtheNetworkforGreeningtheFinancialSystem(NGFS),avolunteerinternationalcoalitiondedicatedtoenhancingtheroleofthefinancialsystemtomanagerisksandmobilizingcapitalforgreenandlow-carboninvestmentsforenvironmentallysustainabledevelopment70.AsofMay2020,theNGFShasexpandedto66membersand12observersfrom5continents.InApril2019,theNGFSpublisheditsfirstcomprehensivereport,underliningthatclimate-andenvironment-relatedriskscanbesourcesoffinancialrisk,andastrongconsensusamongmembershasbeenformedaroundtheunderstanding.Someofthem,suchastheDeNederlandscheBankandtheBankofEngland,havealreadystartedanalysesonsuchrisksandtheirimpactonthefinancialsystem.Chinaisgraduallycatchingup,withthePBOCincreasinglyemphasizingthisissue.InDecember2019,theDeputyGovernorofthePBOC,ChenYulu,announcedinapublicspeech71attheAnnualMeetingoftheChinaSocietyforFinanceandBankingthatthePBCwouldfocusonthreeissuesinthisarea:“(1)theheterogeneouseffectsofclimatechangeonthesegmentsofthefinancialindustryandrespectivepolicyresponses;(2)theimpactofclimatechangeonmicroandmacro-prudentialregulationsandtheirtransmissionmechanism;(3)thefeasibilityandpathwayofincorporatingclimatechangefactorsintoourtwo-pillarmacro-managementframeworkunderpinnedbymonetarypolicyandmacro-prudentialpolicy.”InMay2020,thePBCreleasedaworkingpaperthatreviewstherisksandtheirtransmissionmechanismswithinthefinancialsystemandcalledforcomprehensivetoolstoassess,manage,andregulatethem.Meanwhile,threeworkstreamshavebeenlaunchedundertheNGFStofacilitateresearchandknowledgesharingonmanagingenvironmentalrisks,aswellasscalingupgreenfinanceatthenationallevel.70NetworkforGreeningtheFinancialSystem.(2020).https://www.banque-france.fr/en/financial-stability/international-role/network-greening-financial-system71AnunofficialtranscriptinEnglishcanbefoundathttp://gflp.org.cn/index/index/newsdetail/id/47.html.51Dr.MaJun,representingPBOC,chairedtheSupervisionWorkstream,toenablecentralbanksandsupervisorstobetterunderstandandmanagetheenvironmentalandclimate-relatedfinancialrisks.Acollectionofmethodologiesandtoolsforenvironmentalriskanalysisbyfinancialfirmsisforthcomingin2020.Chinesefinancialfirmshadcontributedtheirexperiencestothecollectionwhilelearningfromtheirinternationalpeers.4.3GreeningInvestmentsintheBeltandRoadChinaisnotonlylookingatitsdomesticinvestmentsandmarket,butalsomakingeffortstogreentheinvestmentsinotheremergingeconomies,particularlyintheBeltandRoadregion.Launchedin2013,theBRIaimstoimprovetheconnectivityandfostertradeandinvestmentamongcountriesalongtheBeltandRoad.ChinahasalsoincorporatedagreenperspectiveintotheBRIandcalledforgreeninvestments,topromotegreendevelopmentintheregion.InNovember2018,theChinaGreenFinanceCommittee,incollaborationwiththeCityofLondon,launchedasetofvoluntaryprinciplesnamedtheGreenInvestmentPrinciplesfortheBeltandRoad(GIP),forfinancialinstitutionsandcompaniesinvestingandoperatingintheregion.TheGIPaimedtoincorporatelow-carbonandsustainabledevelopmentintotheBRIbyencouragingfinancialinstitutionsandcorporationsinvolvedandinvestedinB&Rprojectstosignuptoavoluntarycodeofpractice.Asaprojectfirstproposedinthe9thChina-UKEconomicandFinancialDialogue,theGIPwasdraftedbyagroupoforganizations,includingtheBeltandRoadBankersRoundtable,IFC,PRI,PaulsonInstitute,andtheWorldEconomicForum.TheGIPincludessevenprinciplesatthreedifferentlevels:strategy,operations,andinnovation.Itcallsfortop-downimplementationoftheincorporatedstrategy,communicationamongstakeholders,utilizationofgreenfinancialinstruments,andgreensupplychainpractices,aswellasknowledgesharingandcapacitybuilding.Principles1and2aredesignedtoencouragesignatoriestoincorporatesustainabilityandESGfactorsintocorporatestrategiesandmanagementsystems,aimingtocallforatop-downimplementationprocess.Principles3and4focusoncommunicationwithstakeholdersattheoperationallevel.Specificmeasuresthatsignatoriescouldtaketocontainenvironmentalandsocialrisksincludeenvironmentalriskanalysis,informationsharing,and52conflictresolutionmechanism.Principles5to7aresettoencouragesignatoriestoutilizecutting-edgegreenfinancialinstrumentsandgreensupplychainpractices,andtoimproveorganizationalcapacitythroughknowledgesharingandcollectiveactions.OnApril25,2019,theGIPinauguralsigningceremonywasheldinBeijingaspartoftheSecondBeltandRoadForum.Asoneoftheforum’smostimportantdeliverables,GIPwasreferredtobyChinesePresidentXiJinpinginhiskeynotespeechasanactionpointforgreendevelopmentintheBRIregion.AsofMay2020,37globalinstitutionsfrom14countriesandregions72havesigneduptotheGIP,includingsomeofthelargestbanksinChinaandtheworld.TheseinstitutionshavecommittedtoincorporatingsustainabilityandESGfactorsintotheirmanagementsystems,strengtheningstakeholdercommunicationonenvironmentalandclimateriskinformation,andutilizinggreenfinancialinstruments.Furthermore,accountingfirms(the“BigFour”),financialserviceproviders(Refinitiv),andnon-governmentalorganizationshavevoicedtheirsupportfortheGIP.TheGIPhaveestablishedthematicworkinggroupstodeveloptoolsandmethodologiesforimplementation,specificallyonenvironmentalriskanalysis,informationdisclosure,andgreenproductinnovation.4.4BilateralandMultilateralCooperationInadditiontotheGIP,ChinaandtheUKhavefosteredbilateralcooperationoninformationdisclosure,ESGinvesting,andgreentechincubator,undertheframeworkoftheChina-UKEconomicandFinancialDialogue73.Intermsofinformationdisclosure,ajointgroupwasformedbyChineseandUKmarketplayerstopilottherecommendationsoftheTaskforceonClimate-relatedFinancialDisclosure(TCFD).Asof2019,13institutions,includingbanks,assetmanagers,andinsurancecompanies,havejoinedthegroup.InJune2019,theLondon-BeijingGreenTechnologyInvestmentGatewaywaslaunchedinBeijing,tocreateaninvestmentplatformthatintroducesUKtechnologydeveloperstoemergingmarketslikeChina.72AlistofGIPmemberscanbefoundathttp://gipbr.net/Membership.aspx?type=12&m=273UKGovernment.“UK-China10thEconomicandFinancialDialogue:policyoutcomes”.https://www.gov.uk/government/publications/uk-china-10th-economic-and-financial-dialogue-policy-outcomes53ChinaandFrancealsoworkedtogetherongreenfinanceundertheChina-FranceHigh-LevelEconomicandFinancialDialogue.TheChinaGreenFinanceCommitteeandFinanceforTomorrowhavehostedtwojointmeetingsbetween2018-201974,theytoucheduponawidearrayoftopicsincludingadjustmentofriskweights,harmonizationofstandards,etc.InOctober2019,thePBCjoinedtheInternationalPlatformforSustainableFinance(IPSF),aninter-governmentalplatformforcooperationongreenandsustainablefinance,togetherwithauthoritiesfromtheEU,Argentina,Chile,Canada,India,Morocco,andKenya.4.5CapacityBuildingforGreenFinanceWiththemainstreamingofgreenfinance,anincreasingnumberofcountrieshaveendorsedgreenfinanceoratleastbegantoconsideritasaneffectivemarket-basedtooltomobilizeprivatecapitalforenvironmentalandclimateissues,delivertheirNDCs,andrealizesustainablegrowth.Butnoteveryoneofthemcandoitentirelyontheirown,duetocapacityconcerns,andthusthedemandforcapacitybuildingrose.Acknowledgingsuchhugedemand,Chinahasputgreateffortsintofacilitatingknowledgeexchangethroughengagingincapacity-buildingeventsfortheabovementionedinitiativesandplatforms,aswellasmanyothers,withthehopethatbysharingtheexperiences,countrieswillbringaboutnewinsightsintothisissue.OneoftheplatformsistheGreenFinanceLeadershipProgram(GFLP),launchedbyTsinghuaUniversitywiththeChinaCouncilforInternationalCooperationonEnvironmentandDevelopment(CCICED)andtheIFC-supportedSustainableBankingNetwork(SBN)in201875.Itinvitesglobalexpertsandrepresentativestosharetheirexpertiseandexperienceinaseminarsettingwitharegionalfocus,whereparticipantscanhavein-depthdiscussionswithboththespeakersandotherguests.74Officialpressreleasescanbefoundathttps://financefortomorrow.com/en/actualites/china-france-green-finance-joint-conference/andhttp://greenfinance.xinhua08.com/a/20191130/1900386.shtml?ulu-rcmd=0_comdf_rfill_5_cf3c615349644cb89a9ae7e9ca5bcea5(inChinese).75OfficialpressreleasefortheinauguraleventoftheGFLPcanbefoundathttp://gflp.org.cn/index/index/newsdetail/id/12.html.54AsofSeptember2019,theGFLPhassuccessfullyheldfoureventsinChina,Morocco,andKazakhstan,withmorethan600participantsfrom60countriesandregions,includingpolicy-makers,regulators,andpractitionersfromboththepublicandprivatesectors.In2020,duetotheCOVID-19pandemic,webinarbecamethemajorformofcapacitybuildingforGFLP.Thefirstofitsseries,oninformationdisclosure,hasattractedover2,000participantsfromallovertheworld.Moreareforthcominginthesecondhalfoftheyear.555.LessonsandOutlookChinahasoutpacedmanydevelopingcountriesinbuildingagreenfinancialsystem.Therapidprogress,thoughsomewhatuniqueinacountrycontext,canbeattributedtofivemainfactors:politicalconsensus,top-downapproach,properdivisionoflabor,definedrolesformarketplayers,andregionalinnovation.5.1LessonsformainstreaminggreenfinanceFirst,Chinastarteditsgreenfinanceagendabybuildingapoliticalconsensus.Inmanycountries,greenfinanceispromotedbyoneparticulararmofthegovernmentoranindustrybody,suchasacentralbank,afinancialregulator,anassociation,oranNGO.Chinabackedgreenfinancewithapoliticalpushfromtheverytop.In2014,a14-actionroadmapfordevelopingthegreenfinancesystemwasendorsedbytheCentralLeadingGroupforFinancialandEconomicAffairs.Mostofthese14actionswerealsoincludedintothe“IntegratedReformPlanforPromotingEcologicalProgress”issuedbytheCPCCentralCommitteeandtheStateCouncil,thehighestdecision-makingbodyinChina.ThepoliticalbackingofChina’sPresidentandPremiercarriedenormousweightinmobilizingpoliciesandresourcesandfacilitatinginter-departmentalconsensusongreenfinance.Second,China’sapproachtodesigningthegreenfinancialsystemwastop-downandnotpurelymarket-led.Successfuldevelopmentofgreenfinancerequiresessentialingredientsincluding:•Greentaxonomiesanddefinitionofgreenactivities•Environmentalinformationdisclosurebycorporationsandfinancialinstitutions•Rulesandstandardsforgreenfinanceproducts•IncentivesforcorporationsandfinancialinstitutionsDuetothemanydeficienciesofthemarket,suchasitsinabilitytoaccountforenvironmentalexternalities,asymmetricalaccesstoinformation,andmarketparticipants’lackofanalyticalcapacities,themarket,andtheprivatesectorareoftenunabletoeffectivelyorganizeorproducethoseessentialingredients,certainlynotinashortperiodoftime.Forexample,ifdevelopinggreentaxonomyislefttothemarket,financialinstitutionsmay56producemanycompetingversionswithoutacommonlanguage.Indeed,thelackofsuchacommonlanguagehasconstrainedthedevelopmentofgreenfinanceinmanymarkets.Recognizingtheneedforthegovernmentorregulatortoaddressthemarket’sdeficiencies,Chinatookthetop-downapproach–itsGuidelinesonEstablishingaGreenFinancialSystem(2016)spelledout35actionsonhowtheseingredientsshouldbedevelopedandcoordinated.Third,coordinationamongkeyministries,thedivisionoflaborandanimplementationtimetablearekeystosuccess.Chinarecognizedatthepolicy-designstagethatgreenfinancewasnotmerelytheresponsibilityofthecentralbankorafinancialregulator.Rather,itrequirespolicysupportandresourcesfrommanyothergovernmentagenciesandregulators,includingfiscalsupport,environmentalregulation,andindustrialpolicies.Thatiswhysevenministries,namelythePBOC,theMinistryofFinance,theNationalDevelopmentandReformCommission,theMinistryofEnvironmentalProtection(nowMinistryofEcologyandEnvironment),theCSRC,theChinaBankingRegulatoryCommission,andtheChinaInsuranceRegulatoryCommission(nowcollectivelyknownasChinaBankingandInsuranceRegulatoryCommission),jointlydevelopedthegreenfinanceguidelinesin2016.Moreimportantly,toensurethepolicydocumentsreceivemorethanjustcursorynoteorlipservice,theseguidelineswerefollowedbyapolicydocumenton“DivisionofLabor(DOL)forImplementingtheGuidelines.”ThisDOLlaidoutthespecifictasksforeachofthesevenministriesanddeadlinesfordeliveringtheseveraldozenspecificpolicyactionspromisedintheguidelines.DueinparttothisDOL,theimplementationofthegreenfinanceguidelineshasbeenoneofthemosteffectiveundertakingcomparedtootherpolicies.Fourth,ChinadefinedrolesofindustrialbodiessuchasnationalandlocalGreenFinanceCommittees.In2015,thePBOClaunchedtheGreenFinanceCommitteeofChinaSocietyforFinanceandBanking.TheGFC,with240financialinstitutions,environment-relatedcompanies,andresearchbodiesasmembers,quicklybecamethemaindisseminatorofgreenfinanceknowledge,theorganizerofgreenfinanceproductinnovation,thekeysourceofpolicyrecommendations,andthecoordinatorforcapacity-buildingandinternationalcollaboration.Eachyear,theGFCAnnualMeetingrecognizesnearly20innovationsingreenfinanceresearch,productsortools.TheWeChatnewsportalmaintainedbyGFC,withdailypublications,isnowthemostimportantinformationplatformforgreenfinancepolicies,57productinnovations,andbusinessopportunities.Atthelocallevel,about20regionalGFCsplaysimilarrolespromotinggreenfinancemarketdevelopment.Fifth,Chinaencouragesregionalinnovationingreenfinance.SinceChina’seconomyhasvastregionaldifferences,itisimperativetoencouragelocalplayerstoinnovateintheirapproachesaccordingly.InJune2017,theStateCouncilapprovedpilotprogramsongreenfinancereformandinnovationinfiveprovincesandeightcities.Inthelasttwoyears,manyvaluableexperiencesandinnovationswereidentified.Forexample,Huzhou,oneofthepilotcities,launchedaGreenCreditOnlineServicePlatformprovidinginstante-matchingofgreenprojectswithgreenfundsfrombanks(includingover100greencreditproducts)andinvestors.ThePBOCorganizesannualmeetingsofthesepilotcities,summarizesthebestpracticesandpromotesthemthroughoutthecountry.Inconclusion,greenfinanceaimstousefinancialresourcestoaddressthemarket’ssalientfailuretoaccountforenvironmentalandclimateexternalitiesintoday’seconomy.Thedevelopmentofthegreenfinancialsystemitselfcanalsobehinderedbythelimitationsofthemarket.Forexample,thetaxonomies,productguidelines,anddisclosurerequirementsforgreenfinancearelargelypublicgoods,andthetechnicalcapacitiesforanalyzingenvironmentalandclimaterisksarealsosemi-publicgoodsinnature.Thesefeaturesofthegreenfinancialsystemimplythatgovernmentsandregulatorsmusttakeaproactiveroleinleadingthedesignofthesystemandmobilizeresourcestodevelopthegreenfinancemarket.Abottom-upapproachwiththegovernment“hands-off”,untilrecentlypreferredinmanycountries,mayultimatelyworkastheprivatesectorgainsmoreenvironmentalawarenessandwillingnesstoassumeresponsibilities.5.2FutureprioritiesforscalingupgreenfinanceDespitethenotableprogressthatChinahasmadeinthepastfewyears,thegreenfinancecapacitywithinitsfinancialsystemremainsgrosslyinsufficienttomeetthehugedemandforgreenandlow-carboninvestment.AccordingtoarecentstudyweconductedforChongqing,aprovincial-levelregionwithapopulationof30Million,itsdemandforgreenandlow-carboninvestmentrequiresRMB300Billionperyear.ApplyingthisestimatetotheentirecountrywillmeanthatChinaneedstoinvestatleastRMB10Trillion58annuallyingreenandlow-carbonprojects,threetimesthegreenfinancedemandthatwasestimatedfiveyearsago.Chinaneedsto,andwillverylikely,takemoreaggressivemeasurestofurtherpromotegreenfinanceinthefollowingareas:First,greeninginstitutionalinvestors.Manyinstitutionalinvestorshaveyettodevelopstrongpreferencesforgreeninvestmentsforthelackofbothawarenessandcapacity.Regulators,researchinstitutions,NGOs,andinstitutionalinvestorsshouldworktogethertoraisetheawarenessofthebenefitsofESGinvesting,encourageESGdisclosureoninvestments,developESGproducts,andeducateinvestors.Second,mainstreamingenvironmentalriskanalysis.TheNGFSisplanningtopublishahandbook(withacollectionofmethodologies)topromotetheuseofEnvironmentalRiskAnalysis(ERA)byfinancialinstitutions.Chinashouldmakefulluseofthesetechnicalresourcesandlocalresearchcapacitiestoenablebanks,assetmanagersandinsurancecompaniestoconductstresstestsandscenarioanalysis.TheChinesecentralbankandfinancialregulators,aswellasthegreenfinancecommittee,couldplayakeyroleinmainstreamingtheERA.Third,introducingstrongerincentivesforgreenfinance.ChineseregulatorscouldencouragelargeChinesebanks,whichareauthorizedtouseinternalriskmodels,tolearnfromNatixis’experienceinintroducingdifferentiatedriskweightsforgreenandbrownassets(lowerforgreenandhigherforbrownassets)withoutalteringtheoverallregulatoryriskweights.Onceafewbanks’pilotprogramsareprovensuccessfulanddataissuesarelargelyresolved,thispracticecouldbeappliedtotherestoftheChinesebankingsystem.Fourth,greeninginvestmentsundertheBelt&RoadInitiative.Sinceitsformallaunchin2018,theGIP’sworkinggroupshavebeentakingspecificactionstopromoteenvironmentalimpactassessmenttools,disclosuremechanisms,andinnovativegreenfinanceproducts.Further,wesuggesttheChineseauthoritiestoconsidersettingupa“greenlightsystem”foroutboundinvestments,suchasintroducingamandatoryrequirementforenvironmentalimpactassessmentforoverseasinvestments.Fifth,promotingtheharmonizationofgreenfinancestandardsinChinaandEurope.BothChinaandtheEUhavedevelopedtheirgreenorsustainablefinancetaxonomies,andtheworld’sgreenfinancecommunityis59concernedaboutthetransactioncostsandrisksofgreenwashingassociatedwithaproliferationofinconsistentandincompatibletaxonomies.Manysmallermarketsaremullingwhethertodeveloptheirowntaxonomies.WebelievethatChinaandtheEUshouldtaketheleadinexploringwaystoharmonizetheirtaxonomies,initiallyforfacilitatingcross-boardgreencapitalflows.Inthelongerrun,suchcollaborationmayalsoserveasthebasisfordevelopingharmonizedglobalstandards.Sixth,supportinggreenfinanceinnovationacrossmultiplesectors.Inthepast,mostgreenfinanceactivitiestookplaceinsectorssuchasrenewableenergy,wastetreatment,andgreentransportationinvolvingtypicallylargebanksandprojectowners.ThevastpotentialofgreeningSMEs,consumption,agriculture,andbuildingshaven’tbeentappedinto.Regulators,financialinstitutions,researchbodiesandNGOsshoulddevotemoreresourcestoinnovatinggreenproductsintheseareas.Inparticular,theapplicationofdigitaltechnologiestolabelingandverifyinggreenconsumergoods,greenSMEsandsustainableagriculturalproductsmaysignificantlyreducethecostsofofferinggreenfinanceservicesandrapidlyexpandthemarket.60Annex1:TheFrameworkoftheChineseGreenFinancialSystem76PriorityAreaProvisionsunderthe2016GuidelinesTheImportanceofEstablishingtheGreenFinancialSystem1.Greenfinancereferstofinancialservicesprovidedforeconomicactivitiesthataresupportiveofenvironmentimprovement,climatechangemitigationandmoreefficientresourceutilization.2.Thegreenfinancialsystemreferstotheinstitutionalarrangementthatutilizesfinancialinstrumentssuchasgreencredit,greenbonds,greenstockindicesandrelatedproducts,greendevelopmentfunds,greeninsurance,andcarbonfinance,aswellasrelevantpolicyincentivestosupportthegreentransformationoftheeconomy3.Themainpurposeofestablishingthegreenfinancialsystemistomobilizeandincentivizemoresocial(private)capitaltoinvestingreenindustries,andtomoreeffectivelycontrolinvestmentsinpollutingprojects4.Theestablishmentofthegreenfinancialsystemrequirestheinternalizationofenvironmentalexternalitiesbyappropriateincentivesandrestraintswiththesupportofpolicies,lawsandregulationsinthefinancial,fiscalandenvironmentalareasVigorouslyDevelopGreenLending5.Establishapolicyframeworktosupportgreenlending6.Promoteself-regulatoryorganizationsinbankingindustrytograduallyestablishagreenbankingevaluationmechanism7.Promotesecuritizationofgreenloans8.Explorewaystointroducelenders'environmentallegalliability9.Supportandguidebanksandotherfinancialinstitutionstoestablishacreditmanagementsystemthatconformstothecharacteristicsofgreenenterprisesandprojects10.Supportbanksandotherfinancialinstitutionstotreatenvironmentalandsocialrisksasimportantdriversintheirstresstestsforcreditrisks,andincorporatethesetestresultsintoassetallocationandinternationalpricing11.IncorporatetheenterpriseenvironmentalinformationincludingenvironmentalviolationsintothefinancialcreditinformationdatabaseEnhancetheRoleoftheSecuritiesMarketinSupportingGreenInvestment12.Improvetherulesandregulationsforgreenbondsandunifythegreenbonddefinitions13.Takemeasurestoreducethefinancingcostofgreenbonds14.Explorewaystoformulatestandardsforthirdpartyverificationofgreenbondsandgreencreditrating15.Activelysupportthequalifiedgreenenterprisestoobtainfinancingviainitialpublicofferingsandsecondaryofferings16.Supportthedevelopmentofgreenbondindices,greenequity76http://usa.chinadaily.com.cn/business/2016-09/04/content_26692956.htm61indicesandrelatedproducts17.Graduallyestablishandimprovethemandatoryenvironmentalinformationdisclosuresystemforlistedenterprisesandbondissuers18.GuideinstitutionalinvestorstoinvestingreenassetsLaunchGreenDevelopmentFundsandMobilizeSocialCapitalthroughPPP19.Supporttheestablishmentofallkindsofgreendevelopmentfundsandtheirmarket-basedoperations20.Localgovernmentscouldsupporttheprojectsinvestedbygreendevelopmentfunds21.SupporttheintroductionofthePPPmodelinthegreenindustry,encouragethebundlingofenergysavingandemissionreductionprojects,environmentprotectionprojectsandothergreenprojectswithrelatedhigher-returnprojects,andestablishagreenservicechargemechanismforprojectswitha"publicgoods"natureDevelopGreenInsurance22.Establishacompulsoryenvironmentalpollutionliabilityinsurancesysteminareasofhighenvironmentalrisks23.Encourageandsupportinsuranceinstitutionstoinnovategreeninsuranceproductsandservices24.EncourageandsupportinsuranceinstitutionstoparticipateinthedevelopmentoftheenvironmentalriskcontrolsystemImproveEnvironmentalRightsTradingMarketandDevelopRelatedFinancingInstruments25.Developdifferentkindsofcarbonfinanceproducts26.Promotetheestablishmentofmarketsforpollutantemissionrights,energyuserights,waterrightsandotherenvironmentalrights27.Developfinancinginstrumentsbasedoncarbonemissionrights,pollutantemissionrights,energyuserights,waterrightsandotherenvironmentalrights,withaviewtoexpandingthegreenfinancingchannelsforenterprisesSupportLocalGovernmentInitiativestoDevelopGreenFinance28.ExploresupportivemeasurestopromotegreenfinanceatlocallevelPromoteInternationalCooperationinGreenFinance29.Expandthescopeofinternationalcooperationingreenfinance30.Promotetheprogressive,two-wayopeningofthegreensecuritiesmarket31.Enhancethe"greenness"ofChina'soutwardinvestmentPreventFinancialRisksandStrengthenImplementation32.Improvethesupervisionmechanismtopreventrisksrelatedtogreenfinance33.Governmentagenciesshouldcoordinateandjoinforceinpromotingthedevelopmentofgreenfinance34.Eachregionshould,takingintoaccountlocalcircumstancesandpriorities,activelypromotethedevelopmentofgreenfinance35.Intensifypubliccommunicationsongreenfinance62Annex2:SupportingpolicestoGreenFinance77PriorityAreaSupportingmeasures/policies/requirements/initiativesGreenLending(I)Micro-prudentialpolicy1995,PBOC-Noticeonissuesrelatedtotheimplementationofcreditpoliciesandstrengtheningenvironmentalprotection2007,CBRC–GuidingOpiniononCreditforEnergySavingandEmissionReduction:Limitfinancingtohighpollutionandhighenergyconsumptionprojects.2012,CBRC–GreenCreditGuidelinesoDefiningthreepillarsofbankingfinancialinstitutionsindevelopinggreenloans.First,greenloanswerepromotedfromastrategicperspectivetoincreasethesupportforgreen,low-carbonandcirculareconomy.Second,emphasizeshallbepaidtothepreventionofenvironmentalandsocialrisks.Third,banksshallimprovetheirownenvironmentalandsocialperformance.oForthefirsttime,requirementonmanagementofenvironmentandsocialrisksforChinesebanksoperatingoverseashasbeenaddressedinArticle21.2013,CBRC–GreenCreditStatisticsSystemoSeparatinggreenloansintotwocategories.First,loanstosupportthemanufacturingendofthreestrategicemergingindustries.Second,loanstosupportenergyconservationandenvironmentalprotection-relatedprojectsandservices.11Jul.2018,PBOC-NoticeonlaunchinggreencreditperformanceevaluationschemeforbankingdepositoryfinancialinstitutionsandGreencreditperformanceevaluationschemeforbankingdepositoryfinancialinstitutions(II)Macro-prudentialpoliciesQ32017,PBOC-EvaluationProgramofGreenLoansPerformanceforDeposit-takingFinancialInstitutions(Draft)2017,PBOC-establishedaspecialstatisticalschemeforgreenloans,requiringbankinginstitutionstosubmitquarterlygreenloansstatisticssince2018GreenBondpolicies(I)Issuancemanagement1.Greenfinancebond22Dec.2015,PBOC–Announcementonissuesrelatedtotheissuanceofgreenfinancebonds22Dec.2015,PBOC–GreenBondEndorsedProjectsCatalogue2.Greenenterprisebond77ConsolidatedcontentfromChinaGreenFinanceProgressReport2017andChinaGreenFinanceProgressReport201863Dec.2015,NDRC–GreenBondIssuanceGuidelines3.GreencorporatebondMar.2016,CSRCinstructedShanghaiStockExchange–NoticeofLaunchingthePilotZoneofDevelopingGreenCorporateBond(ThesupportedprojectcatalogueisthesametotheCatalogueissuedbythePBOCon22Dec.2015)Mar.2016,CSRCinstructedShenzhenStockExchange–NoticeofLaunchingthePilotZoneofDevelopingGreenCorporateBond(ThesupportedprojectcatalogueisthesametotheCatalogueissuedbythePBOCon22Dec.2015)Mar.2017,CSRC-GuidanceonSupportingtheDevelopmentofGreenBonds4.Greendebtfinancingtoolsfornon-financialenterprisesMar.2017,NAMFII–OperationalGuidelinesforGreenDebtFinancingToolsofNon-financingEnterprises5.Greenasset-backedsecuritiesApr.2018,ShanghaiStockExchange–VisionandActionPlantoServeGreenDevelopmentandPromoteGreenFinance(2018-2020)(II)GreenbondassessmentandcertificationDec.2017,PBOCandCSRC–GuidelinesonGreenBondAssessmentandCertification(Interim)GreenfundsandgreenPPP(I)Greenfunds(II)GreenPPP2015,MOF,NDRC,PBOC–CircularontheGuidanceofPromotingPPPModelintheFieldofPublicServiceJun.2017,MOF,NDRC,PBOC-CircularonIssuesRelatedtoAssetSecuritizationofPPPProjectsGreeninsurance(I)Environmentalpollutionliabilityinsurance2007,MEE,CBRC-GuidanceonEnvironmentalPollutionLiabilityInsurance2013,MEE,CBRC-GuidanceonPilotWorkofCompulsoryLiabilityInsuranceforEnvironmentalPollutionJan.2015,newEnvironmentalProtectionLawo“Thestateencouragestheinsuranceagainstenvironmentalpollutionliability”Apr.2015,CPCCentralCommitteeandtheStateCouncil-OpinionstoAcceleratetheConstructionofEcologicalCivilizationo“Deepenthepilotworkofenvironmentalpollutionliabilityinsurance”Sept.2015,CPCCentralCommitteeandtheStateCouncil-OverallReformPlanfortheEcologicalCivilizationSystemoputforwardtoestablishthecompulsoryliabilityinsurancesystemforenvironmentalpollutioninhigh-riskareas,anddefinedcompulsoryenvironmentalpollutionliabilityinsurance64systemasanimportantreformtask2016,MEE,CIRC–MeasuresfortheAdministrationofCompulsoryLiabilityInsuranceforEnvironmentalPollution(Draft)Dec.2017,theGeneralOfficeoftheCPCCentralCommitteeandtheGeneralOfficeoftheStateCouncil-ProgramoftheEcologicalEnvironmentalDamageCompensationSystemJun.2018,theCPCCentralCommitteeandtheStateCouncil-OpinionsonComprehensivelyStrengtheningEcologicalEnvironmentProtectionandResolutelyFightingthePollutionPreventionandControlo“Promotethedevelopmentofenvironmentalpollutionliabilityinsuranceandestablishanenvironmentalpollutioncompulsoryliabilityinsurancesysteminhigh-riskareas”Aug.2018,MEE-GuidingOpinionsonFurtherDeepeningthe"ReleaseManagement"ReformintheFieldofEcologicalEnvironmentandPromotingHigh-QualityEconomicDevelopmentDec.2018,theGeneralOfficeoftheStateCouncil-PilotWorkPlanfor"WastelessCity"Construction(II)CatastropheinsuranceMay2017,MOF–MeasuresfortheAdministrationofSpecialReservesforEarthquakeCatastrophicInsuranceforUrbanandRuralResidenceGreenfactormarket29Dec.2017,NDRC–NationalCarbonEmissionTradingMarketConstructionPlan(PowerGenerationIndustry)5Jan.2018,PBOC-CircularonFurtherImprovingRMBCross-borderBusinessPolicytoPromoteTradeandInvestmentRegionalGreenFinanceReformandInnovationPilotZones14Jun.2017,the176thexecutivemeetingoftheStateCouncil-decidedtolaunchpilotzonesforgreenfinancialreformandinnovationinfiveprovinces(regions),i.e.Zhejiang,Guangdong,Xinjiang,GuizhouandJiangxi23Jun.2017,PBOCandothersevenministries-OverallplanforconstructinggreenfinancialreformandinnovationzonesThemaingreenfinancialpolicydocumentsinthepilotarea78RegionPolicyDocumentZhejiangImplementationOpinionsonPromotingDevelopmentofGreenFinanceintheProvinceHuzhouCreditPolicySupportRefinanceSupportGreenCreditManagementMeasuresJiangxiJiangxiProvince's"ThirteenthFive-Year"PlanforBuildingaGreenFinancialSystemImplementationOpinionsofJiangxiProvincialPeople'sGovernmentonAcceleratingtheDevelopmentofGreenFinance78TranslatedbyGoogleTranslate65DetailedImplementationRulesfortheConstructionofGreenFinanceReformandInnovationPilotZoneinGanjiangNewDistrictThekeyworkofGanjiangNewDistrictGreenFinanceReformandInnovationPilotZoneNoticeonStrengtheningtheUseofMonetaryPolicyToolstoSupporttheConstructionofaGreenFinancialReformPilotZoneintheGanjiangNewDistrictGuangdongSeveralmeasurestosupportgreenfinanceandgreenindustryinnovationdevelopmentinHuaduDistrict,GuangzhouNoticeonStrengtheningtheUseofMonetaryPolicyToolstoSupporttheConstructionofGuangzhouGreenFinanceReformandInnovationPilotZoneGuizhouNoticeregardingtheissuanceofthe"Gui'anNewDistrictGreenFinanceReformandInnovationPilotAreaWorkAdvancementPerformanceEvaluationMeasures(Trial)"ImplementationPlanofGui'anNewDistrictConstructionofGreenFinanceReformandInnovationPilotZoneSeveralpoliciesonsupportingGui'anNewDistricttobuildagreenfinancialreformandinnovationpilotzoneGuidanceonsupportinginnovationingreencreditproductsandcollateralGuidanceonpromotingthegreentransformationoftraditionalfinancialinstrumentsDetailedRulesforthePledgeofCreditAssetsofGuiyangCenterSub-branchofthePeople'sBankofChina(Trial)XinjiangMeasuresandEvaluationMethodsfortheConstructionandDevelopmentoftheGreenFinanceReformandInnovationPilotZonesinHami,ChangjiandKaramay,XinjiangUygurAutonomousRegion(Trial)MonetaryPolicyToolsSupportGreenFinanceReformandInnovationPilotZoneGreenEconomyDevelopmentImplementationRules(Provisional)InternationalCooperationonGreenFinance(I)GreenFinanceCooperationUnderBRIMar.2015,NDRC,MFA,MOFCOM-VisionandActionforPromotingtheJoint-ConstructionofSilkRoadEconomicBeltand21stCenturyMaritimeSilkRoada.PolicyJan.2017,CBRC-GuidingOpinionsonRegulatingBankingServiceEnterprisestoGoGlobalandStrengtheningRiskPreventionand66ControlApr.2017,MEE,MFAandotherministries-GuidelinesonPromotingtheConstructionofGreen“BeltandRoad”May2017,MEE-CooperationPlanonEcologicalEnvironmentProtectionSept.2017,GFCwithanother7Ministry-supervisedindustrialassociations-EnvironmentalRiskManagementInitiativeforChina’sOverseasInvestment:toimproveenvironmentalriskmanagementandtheadoptionofresponsibleinvestmentprinciplesofChinesebanksandcompaniesoverseas.30Nov.2018,GreenFinanceCommitteeofChinaSocietyforBankingandFinanceandtheCityofLondon-GreenInvestmentPrinciplesfortheBeltandRoadb.Marketpractice19Jun.2017,ShanghaiStockExchangeandChinaSecuritiesIndex-theSSEGreenCorporateBondIndexandSSEGreenBondIndexwereonlineinbothShanghaiStockExchangeandLuxembourgStockExchangeSept.2017,ICBC–Issued“BeltandRoad”climatebondc.CapacitybuildingChinaDevelopmentBank,UNDP,PekingUniversity-“BeltandRoad”EconomicDevelopmentReport;LegalRiskReportfor“BeltandRoad”CountriesShenzhenStockExchangewithHongKongQualityAssuranceAgencyandothergreenfinancialinstitutions-seminarsandservethegreendevelopmentof“BeltandRoad”throughactivelytappingtheinternationalresourcesofHongKong(II)GreenFinanceCooperationUnderBilateralandMultilateralFrameworksG20GreenFinanceCooperationBilateralandMultilateralFinancialCooperationoChina-UKeconomicandfinancialdialogueoDuringthe23rdUNClimateChangeConference(COP23),ChinaandEuropeissuedWhitePaperonGreenFinanceDevelopmentintermsoftheprimaryresultsoftheresearchongreenfinancestandardoEnterprisesfromChinaandtheUSestablishedtheUS-ChinaGreenFundthroughjoint-venturetosupportgreeninvestmentsbothinChinaandalongthe“BeltandRoad”oEnterprisesfromChinaandtheUSestablishedtheUS-ChinaGreenFundthroughjoint-venturetosupportgreeninvestmentsbothinChinaandalongthe“BeltandRoad”.oShanghaiandShenzhenjoinedinthe“GlobalFinancialCenterGreenFinanceAlliance”oInDecember2017,PBOCisoneof8foundingmembersofCentralBanksandsupervisionsnetworkforGreeningFinancialSystem(NGFS)whichisinabidtocarryoutjointresearches67onfinancialrisksandopportunitiesrelatedtoclimatechangesandenvironmentalfactorsoShanghaiStockExchangeandShenzhenStockExchangejoinedinUnitedNationsSustainableStockExchangeInitiativeandactivelyparticipateinrelevantworkoftheSustainableWorkGroupunderWorldFederationofExchanges(WFE)GreenFinanceCooperationwithMDBsoADBinBeijing-Tianjin-HebeiAirPollutionControloAIIBandNDBtoImproveEnvironmentalandSocialPoliciesandSupporttheGreenDevelopmentinChina(III)InternationalCooperationofFinancialInstitutionsCDBintheChina-PakistanEconomicCorridorHXBandWorldBanktoexplorefinancinginnovationinpollutionpreventionandcontrolEnvironmentInformationDisclosureMar.2018,PBOC-NoticeonStrengtheningtheSupervisionandAdministrationoftheDurationofGreenFinancialBondsandGreenfinancialbonddurationinformationdisclosurespecificationsTheMinistryofEnvironmentalProtectioncompulsorilyrequireskeypollutingcompaniestodiscloseenvironmentalinformation(2017)GuidelinesforEstablishingtheGreenFinancialSystem,thedivisionofdisclosureplanhasbeenmadeclear:Chinamustestablishamandatorysystemforlistedcompaniestodiscloseenvironmentalinformationinsteps:requiredisclosurebymajoremissioncompanies(2017);semi-mandatorydisclosureforallcompanies(2018);expandmandatoryrequirementstoalllistedcompanies(2020).------JointlyissuedbythesevenministriesandcommissionssuchasthePeople'sBankofChinaandtheMinistryofFinance(2016)GreenBondEvaluationandCertificationBehaviorGuidelines(Provisional)(2017):ThePeople'sBankofChinaandtheChinaSecuritiesRegulatoryCommissionrequiregreenbondissuerstodiscloseenvironmentalinformationTheSino-BritishGreenFinanceWorkingGrouphasorganized10Sino-Britishfinancialinstitutions(includingIndustrialandCommercialBankofChina,IndustrialBank,BankofJiangsu,HuzhouBank,HuaxiaFund,EFund,andfourBritishinstitutions)tocarryoutenvironmentalinformationdisclosure,andhasannouncedthreeyearsofactionplan.Inthefuture,itisexpectedtoformatemplateforenvironmentalinformationdisclosureoffinancialinstitutions.The9thChina-UKEconomicandFinancialDialogue(2017)68Annex3:GreenFinancialProductsandServicesinPilotZonesProductcategoryPilotzonesLatestprogressGreenCreditHuzhou,ZhejiangCompiledalistofgreencreditproducts.The35bankinginstitutionsinthecityhavedevelopedatotalof114innovativegreenfinancialproducts.Quzhou,ZhejiangLaunched20innovativegreencreditproducts,includinggreenfundriskpoolloans,five-waterco-governanceloans,pollutionpermitmortgageloans,forestrightmortgageloans,energyconservation,waterconservationandenvironmentalprotectionloans,energyperformingcontractingloans,and"goldenroof"photovoltaicloans,topromotethetransformationandupgradeoftraditionalindustries.GuangdongExpandedmortgagefinancingofenvironmentalrightsandinterests,aswellasforestrycarbonsink.Innovatedcarbonfinanceandmortgagefinancingofcarbonemissionandpollutionpermits.HuaduSub-branchofChinaConstructionBankhascreatedadoublemortgagemode-"carbonemissionpermitmortgage+fixedassetmortgage"andprovidedaloanof2millionyuantoapapercompany.GuizhouLaunched"TeaLoan","KiwiLoan"andothergreencreditproductstobenefitfarmers.TheGuizhouBranchofAgriculturalDevelopmentBankissuedloansforthedevelopmentofhigh-standardfarmlandinunderprivilegedareasinGuizhouProvince.JiangxiLaunchedexclusivegreencreditproductssuchas"GreenChannelforTechLoan","CleanLivestockandPoultryLoan","GreenEnergySavingTechnicalInnovationLoan","PhotovoltaicPovertyAlleviationLoan"and"JinsuiSasanquaLoan".TheBRICSNewDevelopmentBankhasapprovedaUS$200-millionloanforJiangxi'senergy-savingprojects,providingUS$40milliontothefirstbatchof6enterprisesonindustrialenergyconservation,emissionreduction,sewagetreatmentprojectsandothers.GreenBondsQuzhou,ZhejiangQuzhouState-ownedAssetsManagementCo.,Ltdissued1Billionyuanofgreenbondsfortheconstructionofspongecity.GuangdongGuangzhouBankispreparingtoissue5Billionyuanofgreenfinancialbonds,targetinggreenindustryprojectsinHuaduDistrict.GuangzhouYuexiuHoldingLimitedhasissuedthecountry'sfirstgreenbondfinancinginstrumentforthepulpandpaperindustry,withanamountof3Billionyuan.69GuizhouGuizhouBankandGuiyangBankhavesuccessfullyissued13Billionyuanofgreenfinancialbonds,mainlytofundgreenprojectssuchasurbanwastetreatment,waterandenergyconservation,etc.JiangxiShangraoBankandGanzhouBankarepreparingtoissue3Billionyuanofgreenfinancialbondsrespectively.JinkaiGroupofGanjiangNewAreahasfiledtoissue450millionyuanofgreenprivateplacementconvertiblebonds,andhasissuedatotalof350millionyuanbytheendof2018,toraisefundsfortheconstructionofsewagenetworkintheJingkaiClusterofthenewarea.JinkaiGroupisalsopreparingtoissue100millionyuanofABN,toraisefundsfortheconstructionoftheutilitytunnelprojectofNo.1RuleLake.NanchangRailTransitGrouphassuccessfullyregistered2Billionyuanofgreenmedium-termnotesintheinter-bankmarket.XinjiangThefirstgreendebtfinancingplanof100millionyuaninthefirstphaseofXinteEnergy,asubsidiaryofTBEA,wassuccessfullylisted.TheheadofficeofChinaConstructionBankandChangjiZhundongDevelopmentandConstructionGroupCompanysignedacooperationagreementof200millionyuanforunderwritinggreenasset-backedbills,ofwhich100millionyuanhasenteredthestageofassetsecuritization.ThisprojectisthefirstgreenassetsecuritizationfinancingcaseinXinjiang.UrumqiCityTransportationInvestmentCo.,Ltd.issuedthefirstgreencorporatebondinXinjiang,withascaleof1.5Billionyuanandaninterestrateof6.6%,thelowestmarketpriceamongbondsofthesamecategoryinthesameperiod.GreenenterpriseListingHuzhou,ZhejiangThereare2newgreenlistedcompanies,andthenumberofnewlistedcompaniesranks3rdintheprovince.GreenstockindexGuangdongChinaEmissionsExchangelaunchedChina'scarbonmarket100index,targetinggreen,environmentally-friendlyandlowcarbonlistedcompanies,whiletrackingtheindustryofenvironmentalprotection.CarbonFinanceGuangdongHuaduDistrictofGuangzhouhascarriedoutafforestationandreforestationcarbonsequestrationprojects,sellingthecarbonsequestrationquotageneratedbytheseprojectstoenterprisestooffsettheirdomesticemission.Guangzhousuccessfullyimplementedthepublicwelfareforestcarboninclusionproject,organicallycombiningcarboninclusionwithcarbontrading.ChinaEmissionsExchangeinnovativelylaunchedcarbonemissionquotarepurchase,custodyandforwardtransaction.Bytheendof2018,thetotalamountofcarbonemissionquotarepurchasehasreached13.4milliontons,withatransactionvalueof140millionyuan.Thecarbonemissionquotacustodyreached15.88milliontons.Forwardtransactionofcarbon70emissionquotareached3.85milliontons,withatransactionvalueof44.51millionyuan.Thecross-borderRMBsettlementserviceforcarbonemissiontradinghaspromptedanoverseasinvestortobuycarbonquotasinChinaEmissionsExchangewithRMB.GreenguaranteeHuzhou,ZhejiangSetupapolicyfinancingguaranteecompanywitharegisteredcapitalof170millionyuan,focusingongreenSMEs.Quzhou,ZhejiangRaisedtheregisteredcapitalofpolicyfinancingguaranteecompaniesfrom150millionyuanto200millionyuan,tosupportthedevelopmentofgreenSMEs.JiangxiEstablishedJiangxiYouthVentureFinancingGuaranteeCorporation,prioritizinggreensmallandmicroenterprises.GreenInsuranceHuzhou,ZhejiangIntroducedasparaguspriceindexinsurance,whitetealow-temperatureweatherindexinsuranceandwaxberryharvestseasonrainfallindexinsurance.Theinlandrivershipoilpollutiondamageliabilityinsuranceislaunchedwith77shipsinsured,covering43,500yuan.Quzhou,ZhejiangPilotedthepiginsuranceandharmlesstreatmentmechanism,covering2.07millionpigs,whichachieved100%insurancerate,harmlesstreatmentrateofdeadpigsandclaimrateofdeadpigs.Introducedacomprehensiveliabilityinsuranceforelectricbicycles,covering600,000electricbicyclesinthecity,andprovidingariskguaranteeof25Billionyuan.GuangdongHuaduDistrictofGuangzhouhaslaunchedthefirst"innovativedrugreplacementliabilityinsurance"inthecountry,andhasinnovatedanddevelopedgreeninsuranceproductssuchas"rainfallindexinsuranceforvegetables","greenagriculturalinsurance+","insuranceforgreenagriculturalproductqualityassurancetraceability"and"greenproductfoodassuranceliabilityinsurance".GuizhouIn2018,Guizhou'sagriculturalinsurancepremiumincomereached1.19Billionyuan,withayoyincreaseof44.1%.JiangxiPICCPropertyInsurancelaunchedthefirst"Weather+Price"incomecomprehensiveinsuranceforcitrusandteanationwide;cooperatedwith3agriculturalcooperativestodevelop"costandpriceinsuranceforbreedingfeed".Whenthepriceofcorn,soybeanmealandotherfeedrawmaterialspurchasedbythespecializedcooperativessurpassesthefuturespriceofthedesignatedperiod,PICCGanjiangNewAreabranchwillcompensateforthedifference.GreenFundsJiangxiJianglingNewEnergyAutomobileIndustryFundwithascaleof10BillionyuanhasbeenestablishedinGanjiangNewArea,andYongxiuGrouphasestablishedaLvmaiGreenNewEnergyInvestmentFundwithascaleof1.68Billionyuan.71Annex4:Greenfinanceregulations/initiativesthatapplytoChineseoutboundinvestment/BRIRegulations/initiativesDateMinistriesGoalLinkGreenCreditGuidelinesFeb2012ChinaBankingRegulatoryCommissionRequireChinesebankstoconcernandmanageenvironmentandsocialrisksdomesticandoverseaslendingandprovidemorespecificguidanceonbothdomesticandoverseaslending.Theyemphasizethecrucialrolethatfinancialinstitutionsplayinthedevelopmentofasustainableandenvironmentallyfriendlyeconomy.Theyofferdirectionforgreenlendingpoliciesandrequirebanksto“identify,measure,monitor,andcontrolenvironmentalandsocialrisks”intheiroperations.http://www.cbrc.gov.cn/govView_EE92ECB77DB049C095838BFCCA48EF50.htmlGuidingOpinionsonRegulatingBankingServiceEnterprisestoGoGlobalandStrengtheningRiskPreventionJan.2017ChinaBankingRegulatoryCommissionRequiresbankstohavethroughoutmanagementonenvironmentalandsocialrisk,safeguardtherightsandinterestsoflocalpeople,enhancetheexchangeandinteractionwithstakeholders,andstrengtheninformationdisclosure.http://www.cbrc.gov.cn/chinese/home/docView/F8939136D6E6448FA02133740A3B83A8.htmlTheBeltandRoadEcologicalandEnvironmentalCooperationPlanMay2017MinistryofEnvironmentalProtectionStrengthencooperationoneco-environmentalprotectionandenableeco-environmentalprotectiontoserve,supportandguaranteetheBRItowardsenvironment-friendlyroutes.https://www.yidaiyilu.gov.cn/wcm.files/upload/CMSydylgw/201705/201705140543014.pdfGuidanceonPromotingGreenBeltandMay2017MinistryofEnvironmentalProtection;Buildpragmaticandefficienteco-environmentprotectioncooperation&exchangehttps://www.yidaiyilu.gov.cn/wc72RoadMinistryofForeignAffair;NationalDevelopmentandReformCommission;MinistryofCommercesystems,supportandserviceplatformsandindustrialtechnologicalcooperationbases,formulateandexecuteaseriesofeco-environmentriskpreventionpoliciesandmeasuresandlayasolidfoundationforgreen‘BeltandRoad’Initiativewithin3to5years;Buildarelativelycompleteeco-environmentprotectionservice,supportandguaranteesystem,implementacohortofkeyeco-environmentprotectionprojectsandachievefavorableresultswithin5to10years.m.files/upload/CMSydylgw/201705/201705161104041.pdfEnvironmentalRiskManagementInitiativeforChina'sOverseasInvestmentsSept,2017GreenFinanceCommitteeand6ministry-supervisedassociationsandcommittees.GuideChinesefinancialinstitutionsandnon-financialenterprisestostrengthenenvironmentalriskmanagementintheprocessofoverseasinvestmenthttp://www.doc88.com/p-0992542878265.htmlGreenInvestmentPrinciples(GIP)fortheBeltandRoadNov,2018ChinaGreenFinanceCommittee;CityofLondon’sGreenFinanceInitiativeIncorporatelow-carbonandsustainabledevelopmentintotheBeltandRoadInitiativebyencouragingfinancialinstitutionsandcorporatesinvolvedandinvestedinB&Rprojectstosignuptoavoluntarycodeofpracticehttp://gipbr.net/SIC.aspx?id=170&m=2

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