China’s green finance market seen quadrupling to US$10.4 trillion by 2031, but lack of ESG data holding back funds, products, UBS says

While China’s green finance market has reached 16 trillion yuan, assets under management in ESG funds only total around 500 to 600 billion yuan

Since the first green bond was issued in 2016, the cumulative volume of sustainable bonds in China had reached 1.73 trillion yuan by the end of 2021

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China’s green finance market is set to grow rapidly and reach US$10.4 trillion by 2031, according to UBS. Photo: Shutterstock

Published: 8:30am, 14 Jan 2023

China’s sustainable finance market could more than quadruple to 70 trillion yuan (US$10.4 trillion) by 2031, according to Swiss investment bank UBS.

But the lack of useful and comparable environmental, social and governance (ESG) data is a major hurdle for the development of ESG funds or products in China, said Ronald Wu, UBS’ head of ESG and sustainability research in Asia-Pacific.

The size of the green finance market in the world’s largest emitter nation has already reached 16 trillion yuan, accounting for about 8 per cent of the country’s entire financial system, supported by President Xi Jinping’s pledge in 2020 for China to peak national emissions by 2030 and achieve carbon neutrality by 2060.

Close to 15 trillion yuan of China’s sustainable finance market consists of green loans, mainly from commercial banks, according to UBS. But assets under management of ESG funds has only reached around 500 to 600 billion yuan, representing a small portion of the market.

“If there are better information disclosures [by firms], it would make it easier for investors to include some Chinese companies in some of their indexes and products, which will play an important role in promoting the development of ESG investment,” he said at the UBS Greater China Conference 2023 on Thursday.

ESG disclosure requirements from both regulators or standard-setters will have a positive effect on promoting the development and growth of ESG funds and investments, he added.