China’s central bank is mulling imposing mandatory requirements on the country’s sprawling state-owned financial institutions to help promote green economic activity as part of the country’s ambitious push towards carbon neutrality by 2060. China aims to hit peak emissions before 2030 and achieve carbon neutrality – by balancing new emissions with removal – by 2060 as pledged by President Xi Jinping to the United Nations General Assembly in September. To turn the world’s largest greenhouse gases emitter into a carbon-neutral country in less than four decades will cost around US$5 trillion and prompt social upheaval as coal-mining jobs are lost. “To meet this climate objective, China needs to speed up its transition to low carbon production and consumption,” Yi Gang, Governor of the People’s Bank of China ( PBOC ), told a virtual fintech conference hosted by Singapore on Wednesday, while laying out his plans to muster financial resources to the cause. The country’s financial regulators are banding together to rally financial institutions to fund the shift towards greater reliance on wind and solar energy, led by the powerful central bank. Green bonds and green loans could play a big part in financing low carbon energy and manufacturing technologies and infrastructure. As of June, China’s banks had extended more than 11 trillion yuan (US$1.7 trillion) in green loans, the most by a nation globally. Green bonds totalled 1.2 trillion yuan, the second-largest in the world. The PBOC has already strengthened its oversight of green finance, including evaluating banks’ performance in supporting green finance. The mandatory requirements would be a step further. The PBOC and other ministries have also said that they would smooth the way for international investors to enter China’s green finance market. But companies’ use of proceeds from the issuance of bonds has long been a sticking point for the participation of foreign investors, many of whom need to document clearly how “green” the company they are backing really is. To help funnel private capital into green projects, international organisations say investors need more data and disclosure. The Swiss-based Financial Stability Board in March said it would look to boost financial disclosure related to climate change to promote more informed investment, credit, and insurance underwriting decisions. China’s definition of green financing has often fallen short of international guidelines on the use of proceeds. To narrow the gap, the PBOC this year revised issuance guidelines to remove “clean utilisation of fossil fuels” from the list of projects that can qualify as “green”. However, the central bank still allows up to half of the proceeds to be used as “general working capital” not earmarked for specific green projects, well above London-based non-profit Climate Bonds Initiative’s 5 per cent standard. China is engaged in a full-court press at international institutions such as the G20 to harmonise standards and promote its effort on climate change. Others institutions where it has reached agreements include the Network for Greening the Financial System , a forum of 75 central banks and financial supervisors as well as the International Platform on Sustainable Finance . “We will promote harmonisation of green-finance standards at home and abroad by updating domestic standards and strengthening international cooperation,” said Yi. The measures outlined by Yi build on China’s previous efforts to support green economic activity. In 2016, the PBOC and other ministries published overarching guidelines for establishing a green financial system. Since then, China has developed a range of green financing products such as green credit, green bonds, green agricultural insurance, green energy insurance and green trusts. China has established zones to pilot green financial reforms in nine cities since 2017. “In these pilot programmes strong progress has been made in strengthening the green finance policy framework, introducing new products and services and implementing policy incentives,” said Yi.