Do a good job in green finance to promote the green transformation of the economy

Ma Jiantang Shen Junjie

Green and low-carbon development is the trend of the times, and in this context, green finance has emerged and become more and more important. General Secretary Xi Jinping emphasized at the National Conference on Ecological and Environmental Protection to "strengthen financial support and vigorously develop green finance". The Decision of the Central Committee of the Communist Party of China on Further Comprehensively Deepening Reform and Promoting Chinese-style Modernization (hereinafter referred to as the "Decision") deliberated and adopted by the Third Plenary Session of the 20th Central Committee of the Communist Party of China further requires that the reform of the financial system be deepened and the development of science and technology finance, green finance, inclusive finance, pension finance and digital finance should be actively developed. We must conscientiously study and implement the important instructions of General Secretary Xi Jinping and the deployment requirements of the CPC Central Committee, do a good job in green finance, and accelerate the comprehensive green transformation of economic and social development.

1. Deeply understand the importance of developing green finance

The development of green finance is an inevitable requirement for practicing Xi Jinping Thought on Ecological Civilization and building a beautiful China. Building a beautiful China is a major strategic arrangement made by the CPC Central Committee with Comrade Xi Jinping at the core based on the overall situation of socialist modernization, and is the core essence of Xi Jinping Thought on Ecological Civilization. Comprehensively promoting the construction of a beautiful China is inseparable from strong financial support. Green finance is to support environmental improvement, climate change and resource conservation and efficient use of economic activities, through green credit, green bonds, green stocks, green insurance, green development funds, carbon finance and other financial products and services, will guide funds to energy conservation and environmental protection, clean energy, green transportation, green buildings and other fields, will effectively reduce environmental pollution, greatly promote the development of green industries, ecological protection and restoration and the construction of a beautiful China.

The development of green finance is an important part of accelerating the construction of a financial power and empowering the real economy. Finance is the blood of the national economy, and serving the real economy is the fundamental purpose of financial work. Last year's Central Financial Work Conference clearly pointed out that it is necessary to accelerate the construction of a financial power and do a good job in science and technology finance, green finance, inclusive finance, pension finance, and digital finance. In essence, green finance is a financial mechanism that transforms lucid waters and lush mountains into gold and silver mountains, and internalizes the externalities in the field of green development by making the hidden benefits of lucid waters and lush mountains and the hidden costs of pollution explicit, and reconstructing the price formation mechanism of capital factors, so as to improve the preference of financial entities for green development. The development of green finance will help improve the international competitiveness and anti-risk ability of the mainland's financial system, promote technological progress in the fields of energy conservation, environmental protection, new energy, etc., and empower new quality productivity such as green industries and future industries.

The development of green finance is an important starting point for promoting international financial cooperation and enhancing international influence. Green finance originates from environmental finance that emerged after the early green movement in Western countries, and the practice of green finance can be traced back to the "ethical bank" (GLSBank) established by the Federal Republic of Germany in 1974. Since the beginning of the 21st century, green finance has attracted more and more attention from international organizations, governments, enterprises and financial institutions, and is becoming an important area and core issue of international financial cooperation. As one of the first countries in the G20 to raise the issue of green finance, the mainland vigorously develops green finance, actively participates in the formulation and promotion of international standards, and helps the green development of countries and regions under the Belt and Road Initiative.

Second, the mainland's green finance is riding on the momentum and booming

The top-level design of green finance development has been improved. In recent years, the CPC Central Committee and the State Council have made systematic arrangements for the development of green finance, and important policy documents such as the Third Plenary Session of the 20th Central Committee of the Communist Party of China, the National Conference on Ecological and Environmental Protection, the Central Financial Work Conference, and other important policy documents have put forward clear requirements for the development of green finance. In 2016, seven departments, including the People's Bank of China and the Ministry of Finance, jointly issued the Guiding Opinions on Building a Green Financial System, and then clarified the policy ideas of green finance to play "three major functions" and improve the "five pillars". In April this year, the People's Bank of China, the National Development and Reform Commission and other seven departments jointly issued the "Guiding Opinions on Further Strengthening Financial Support for Green and Low-Carbon Development", which put forward more forward-looking and overall policy guidance for deepening the reform and development of green finance. In May, the State Administration of Financial Supervision issued the "Guiding Opinions on the Banking and Insurance Industries to Do a Good Job in Finance", clearly focusing on the "dual carbon" goal and improving the green financial system.

Green financial products and market systems have been continuously enriched. The scale of green credit has maintained rapid growth, and data from the People's Bank of China shows that since the end of 2021, the balance of green loans in mainland China has maintained a year-on-year growth rate of about 30%. As of the end of June this year, the balance of green loans in domestic and foreign currencies was 34.8 trillion yuan, a year-on-year increase of 28.5%. According to data from the Climate Bonds Initiative (CBI), by the end of 2023, the cumulative scale of green bonds issued by the mainland reached US$372 billion, ranking second in the world after United States, and ranking first in the world in terms of annual issuance scale for two consecutive years. At the same time, the premium income and compensation expenses of the green insurance business have grown rapidly, the carbon emission trading market has been progressing smoothly and orderly, the pilot project of emission rights trading is progressing smoothly, the national greenhouse gas voluntary emission reduction trading market has been restarted, the eco-environment-oriented development (EOD) model and the establishment of ecological and environmental protection project reserves, and the innovative development of green stocks and green leasing. Investment policy tools to support green development have been continuously enriched, and new investment and financing tools such as green development funds and real estate investment trusts (REITs) have been emerging. Taking the National Green Development Fund as an example, the scale of the first phase of fundraising is 88.5 billion yuan, of which more than 700 billion yuan is leveraged as social capital.

The exploration of local green finance practices continues to advance. Since 2017, the State Council has approved 10 pilot zones for green finance reform and innovation in 10 provinces (autonomous regions and municipalities) including Zhejiang, Xinjiang and Chongqing, and 23 pilot cities for climate investment and financing, including Miyun District in Beijing and Baoding in Hebei Province. Under the guidance and support of relevant departments, each pilot area has gradually explored its own unique regional green finance development path based on reality and seized opportunities. Quzhou, Zhejiang Province took the lead in establishing a carbon account system in the country, Guangzhou, Guangdong Province innovated carbon emission rights mortgage financing, Xinjiang Changji carried out financing model innovation based on industrial enterprise carbon accounts, Jiangxi Ganjiang New Area launched a carbon neutrality fund, Guiyang and Gui'an New Area in Guizhou Province focused on building a "forest carbon pool", and Ningde City set up a carbon neutrality fund to support the development of new energy industries with green finance and promote new energy vehicle manufacturing and battery energy storage technology innovation. These local explorations have accumulated valuable experience for the development of green finance across the country.

International cooperation on green finance has been deepened. China is an active participant and strong promoter of international green finance cooperation, and has initiated and launched a series of international cooperation mechanisms on green finance, including the G20 Sustainable Finance Working Group, the Common Taxonomy of Sustainable Finance (CGT) Working Group, the Green Investment Principles (GIP) of the Belt and Road Initiative, and the Sustainable Investment Capacity Building Alliance (CASI). It has played a leading role in providing capacity building to developing countries. At the same time, under the framework of the Belt and Road Initiative, the mainland actively advocates and promotes green finance cooperation among countries along the Belt and Road, encourages green investment and green infrastructure construction, and provides financing support for green projects in countries along the Belt and Road through the Silk Road Fund and the Export-Import Bank of China. For example, some large state-owned banks have issued green bonds in international financial centers such as London and Luxembourg, which not only enhanced the mainland's influence in the international financial field, but also made positive contributions to global green development.

3. Further deepen reform in an all-round way and build a new situation for the development of green finance

On the new journey, in the face of the urgent need to achieve the "double carbon" goal, the standard requirements of building a financial power and the development trend of international zero-carbon finance, there are still certain shortcomings and gaps in the development of green finance in mainland China, and it is urgent to further deepen the reform in an all-round way, handle the relationship between the government and the market, development and security, domestic and international, risk and return, and do a good job in green finance.

Strengthen top-level design and lay a solid foundation for development. Improve the leadership and coordination mechanism for green finance, deepen the coordination and cooperation between financial management, ecology and environment, science and technology, development and reform and other departments, and strengthen overall planning and policy coordination. Promote legislation in the field of green finance in an orderly manner, and localities with conditions can take the lead in promulgating local green finance regulations, so as to better play the role of the rule of law in consolidating the foundation, stabilizing expectations, and benefiting the long-term. Clarify the timetable and roadmap for the implementation of the Continental Sustainability Disclosure Standards as soon as possible, and substantively promote large enterprises and financial institutions to improve their sustainability disclosures, including climate information. Formulate a unified green finance standard system, accelerate the research and formulation of transition finance standards, and provide financial support for the green and low-carbon transformation of traditional industries.

Strengthen innovation-driven and enrich the product and service system. Guide all types of financial entities to carry out innovation in green financial products and services under the premise of compliance with laws and regulations and controllable risks. Encourage financial institutions and technology enterprises to strengthen cooperation, and actively use big data, blockchain, artificial intelligence and other scientific and technological means to expand the boundaries of green financial products and services, and improve the efficiency and level of green financial services. Do a good job in summarizing and evaluating the green finance reform and innovation pilot zones, actively promote the use of effective practices, and orderly carry out the upgrading and expansion of the pilot zones. Promote the innovation of carbon financial products and derivatives in an orderly manner, expand the support areas of carbon emission reduction support tools, and accelerate the exploration of multi-level, wide-coverage and sustainable green finance development models.

Expand international exchanges and strengthen practical cooperation. We will carry out international exchanges and cooperation on green finance with a more active attitude, actively participate in and continuously expand multilateral and bilateral green finance cooperation and dialogue mechanisms, and continue to build a global consensus on the development of green finance. Actively participate in the construction and promotion of globally convergent green finance development initiatives and standards, promote the compatibility of Chinese standards with international standards, promote mutual recognition with major trading partners in terms of carbon footprint and other rules, and strengthen the coordination and coordination of green financial resources. Actively benchmark against international standards, and tell the story of China's green finance in international, professional and market-oriented language. Actively participate in the international zero-carbon financial governance mechanism, reasonably learn from useful experience, and promote the reform of the domestic financial system.

[The author, Ma Jiantang, is a member of the Standing Committee of the 14th National Committee of the Chinese People's Political Consultative Conference, deputy director of the Economic Committee, and former secretary of the Party Leadership Group of the Development Research Center of the State Council; Shen Junjie is the Director of the Office of the Party Committee (Personnel Bureau) of the Development Research Center of the State Council]