This research report was commissioned by the Sino-German Climate Cooperation – Climate Partnership Project of the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) and is the result of the research results of the International Climate Initiative (IKI) funded by the German Federal Foreign Office.
Finance will play a vital role in the global green and sustainable development process. In China, to achieve the climate goals of carbon peak before 2030 and carbon neutrality before 2060, the entire economy and society will usher in a broad and profound systemic change, and the financial market will not only provide hundreds of billions of financial support for this, but also continue to transform towards a greener and more sustainable goal.
In recent years, driven by top-down policies, China's green finance has developed rapidly, with the rapid expansion of the green finance market, the emergence of product innovations, and the gradual development of sustainable finance with a broader connotation. At the same time, with the proposal of the "dual carbon" goal, climate investment and financing have become the most important area of green finance. While the results are abundant, there is still a funding gap to achieve carbon neutrality and other sustainable development goals, and China's sustainable finance market will continue to develop with China's "dual carbon" goals and the promotion of green and sustainable development processes, and show new development trends. In this context, this topic comprehensively reviews the development of sustainable financial products and markets in China in recent years, and looks forward to future trends.
The report of this project mainly contains the following three parts:
(1) Overview of China's sustainable finance market. This chapter mainly reviews the concepts related to sustainable finance in China, as well as the background and policy framework of sustainable finance development in China. In terms of concept, in China, there are relatively clear official definitions of green finance and climate investment and financing, and although there is no official definition of sustainable finance, a certain market consensus has been formed. In terms of development background and policy framework, in recent years, with the in-depth promotion of China's ecological civilization construction and green development, green finance has become an important support and guarantee. China's green finance policy system has been basically established, the top-level system has been basically established, and policies in various fields, including the standard system, information disclosure system, product policy system, etc., have been continuously improved, and a number of local pilot projects have been promoted. As the construction of ecological civilization in mainland China has entered a new stage with carbon reduction as the key strategic direction, the relevant systems for climate investment and financing have been successively enriched and improved.
(2) Inventory of China's sustainable financial products and markets. This chapter provides a comprehensive inventory of China's sustainable financial products and markets, including relevant standards and policies, market overviews and typical cases of various sustainable products, including five categories of products and instruments: debt products and instruments, including green credit, green, social and sustainable development bonds, transition financing products, green financial leasing and other innovative products, and equity products and instruments, including green investment products (green funds, green PE/VC, green indexes, green trusts) and ESG Investment products (ESG index, ESG fund, ESG wealth management), climate investment and financing products (climate index, climate fund, climate private equity investment, etc.), green insurance and disaster risk financial instruments, green financial technology, including financial technology enabling green industry and finance docking, green financial supervision, green financial business development and environmental risk management, carbon neutrality and information disclosure, etc., and fifth, cross-border financial products, including offshore green bonds, green panda bonds, etc.
(3) China's sustainable financial products and market outlook. Looking forward to the future development of sustainable financial products and markets in China, this chapter will present four major trends: first, the rapid development of transition financial products, second, the integrated development of green finance and inclusive financial innovation from "green" to "sustainable", third, the diversified development of green and sustainable financial markets, and fourth, the continuous deepening of international cooperation on green finance and sustainable finance.
1. Overview of the development of China's sustainable finance market1.1 In order to achieve green and sustainable development of sustainable finance concepts in China, both developed and developing countries need a lot of financial support. As the core of the modern economy and the hub of social resource allocation, finance should more accurately guide and optimize resource elements to serve green and sustainable development, resulting in the emergence of sustainable finance, green finance, climate finance (climate investment and financing) and other concepts, and these concepts are constantly developing. In China, there are clear official definitions of green finance and climate investment and financing, and although there is no official definition of sustainable finance, there is a certain market consensus. Generally speaking, climate finance (climate finance and financing) focuses on investment and financing activities in the field of climate change, mainly including climate change adaptation and climate change mitigation, which are an important part of green finance. Economic activities with other environmental goals, such as the economical and efficient use of resources, while sustainable finance is more inclusive, focusing not only on environmental issues, but also on social and economic goals.
1.2 Background and Policy Framework for the Development of Sustainable Finance in China1.2.1 Development Background: China's ecological civilization construction has been further promoted, and green development has entered a new stageIn recent years, China's green finance has developed rapidly, mainly due to the in-depth promotion of China's ecological civilization construction and green development. Since the 18th National Congress of the Communist Party of China, China's ecological civilization construction has been further promoted, the strategic layout and ideological construction have been continuously matured, the top-level design and institutional system have been continuously improved, and the construction of China's ecological civilization has undergone historic, turning and overall changes from theory to practice. With the proposal of the "dual carbon" goal, China's ecological civilization construction and green development have entered a new stage of development. The strategic layout and ideological construction of ecological civilization continue to mature. In 2012, the 18th National Congress of the Communist Party of China included the construction of ecological civilization in the overall layout of the "five-in-one" construction of socialism with Chinese characteristics, in 2015, the Fifth Plenary Session of the 18th Central Committee of the Communist Party of China listed the concept of "green development" as one of the five new development concepts, and in 2017, the report of the 19th National Congress of the Communist Party of China for the first time included "Beautiful China" as an important goal of China's socialist modernization, emphasizing that the construction of ecological civilization is a millennium plan for the sustainable development of the Chinese nation, and will "adhere to the harmonious coexistence of man and nature" In 2018, the National Conference on Ecological and Environmental Protection pointed out that the construction of ecological civilization is a fundamental plan related to the sustainable development of the Chinese nation, and formally established Xi Jinping Thought on Ecological Civilization, raising our Party's understanding of the laws of ecological civilization construction to a new height. The top-level design and institutional system of ecological civilization have been continuously improved. The meeting of the Political Bureau of the Central Committee of the Communist Party of China held in September 2015 deliberated and approved the "Overall Plan for the Reform of the Ecological Civilization System", which has become the top-level design and deployment of the reform in the field of ecological civilization. Since the 18th National Congress of the Communist Party of China, China has organized the implementation of the main functional zone strategy, established and improved a series of important systems such as the property rights system for natural resource assets, the land and space development and protection system, the evaluation and assessment system for the construction of ecological civilization and the accountability system, and formulated and revised many laws and regulations such as the Environmental Protection Law, the Air Pollution Prevention and Control Law, and the Water Pollution Prevention and Control Law. The central ecological and environmental protection supervision system has been fully rolled out and has become a hard and practical measure to implement the responsibility of ecological and environmental protection. The "dual carbon" goal was first mentioned and the nationally determined contribution document was updated, and the construction of ecological civilization and green development entered a new stage. In recent years, China has actively participated in international climate change negotiations, voluntarily submitted its Nationally Determined Contributions (NDCs) to address climate change, and proposed to "jointly build a community with a shared future for mankind", actively promoted South-South cooperation on climate change, regarded green and low-carbon development as an important part of the construction of ecological civilization, and continued to promote climate change work. In particular, on September 22, 2020, Chinese President Xi Jinping announced in his speech at the General Debate of the 75th Session of the United Nations General Assembly: "China will increase its nationally determined contributions, adopt more robust policies and measures, strive to peak carbon dioxide emissions before 2030, and strive to achieve carbon neutrality before 2060." "This is the first time that China has explicitly proposed a carbon neutrality goal, and it has also raised its 2015 commitment to achieve carbon peak by around 2030. In 2021, China submitted to the United Nations the "Effectiveness of China's Nationally Determined Contributions, New Targets and New Measures", which officially included the "dual carbon" goal in the new NDC document. China's ecological civilization construction has entered a critical period with carbon reduction as the key strategic direction, promoting the synergy of pollution reduction and carbon reduction, promoting the comprehensive green transformation of economic and social development, and realizing the improvement of ecological environment quality from quantitative to qualitative change. In the three years from 2020 to 2023, the CPC Central Committee and the State Council issued the "Opinions on Completely, Accurately and Comprehensively Implementing the New Development Concept and Doing a Good Job in Carbon Peak and Carbon Neutrality", the State Council issued the "Action Plan for Carbon Peaking Before 2030", and relevant departments issued 12 implementation plans for key areas and key industries and 11 support and guarantee plans, 31 provinces (autonomous regions and municipalities) formulated implementation plans for carbon peaking in their respective regions, and China's "1+N" policy system for carbon peaking and carbon neutrality has been basically constructed.
1.2.2 China's green finance policy system has been basically constructedIn recent years, China has formulated and promulgated a series of policies and systems to promote the development of green finance, and the green financial system has been gradually built and continuously improved, which has strongly supported China's green development. (1) The top-level system of green finance in China has been basically established, and the top-level framework system of green finance has been established. In August 2016, seven ministries and commissions jointly issued the "Guiding Opinions on Building a Green Financial System" (hereinafter referred to as the "Guiding Opinions"), marking the establishment of a top-level framework system for green finance in mainland China, and the mainland became the first country in the world to establish a relatively complete green finance policy system. The "Guiding Opinions" clarifies the definition of green finance in mainland China, and proposes to establish a multi-level green financial system from the aspects of vigorously developing green credit, promoting the securities market to support green investment, setting up green development funds, developing green insurance, improving the environmental rights and interests trading market, supporting local development of green finance, and promoting international cooperation in green finance. In 2017, the People's Bank of China launched <关于构建绿色金融体系的指导意见>the "Implementation of the Division of Labor Plan", and the construction of China's green financial system is progressing in an orderly manner. The policy idea of green finance development under the "dual carbon" goal has been initially established. In order to support the realization of carbon peak and carbon neutrality goals, the People's Bank of China has initially established the green finance development policy idea of "three functions" and "five pillars" to adapt to the profound changes in the country's industrial structure, energy structure, investment structure and people's lifestyle. Among them, the "three major functions" refer to: one is to give full play to the role of resource allocation, the second is to do a good job in risk management related to climate change, and the third is the market pricing function, including the function of promoting the discovery and pricing of carbon rights trading market under the constraint of carbon neutrality. The "five pillars" are: first, to improve the green finance standard system, second, to improve the supervision of financial institutions and climate and environmental information disclosure requirements, third, to build a policy incentive and restraint system, fourth, to continuously improve green financial products and market system, and fifth, to strengthen international cooperation in green finance.
The guidelines for the development of green finance for financial institutions in the banking and insurance industry have been upgraded. On June 2, 2022, the former China Banking and Insurance Regulatory Commission (CBIRC) issued the Guidelines for Green Finance in the Banking and Insurance Industry (hereinafter referred to as the "Guidelines") to guide banking and insurance institutions to increase their support for the green, low-carbon and circular economy, prevent environmental, social and governance risks, and improve their own environmental, social and governance performance. It is a programmatic document to guide the future development of green finance by financial institutions in the banking and insurance industry in mainland China. The Guidelines have comprehensively upgraded the original Green Credit Guidelines issued in 2012 and presented five highlights: first, to promote the development of green finance by banking and insurance institutions in an all-round way, second, to broaden the coverage and improve the effectiveness of green finance policies, third, to focus on the environment (E) and society (S), to more emphasis on environment (E), society (S) and governance (G), and fourth, to serve the mainland to achieve carbon peaking, Fifth, we have further strengthened information disclosure and stakeholder communication. (2) Policies in all areas of the green financial system have been continuously improved