Explainer | What is green finance, and why is it important to China’s carbon neutral goal?
- China has quickly expanded to become the world’s second-largest green bond market after the United States
- To become carbon neutral, China must have policies for green and low-carbon development, Premier Li Keqiang said in his 2021 government work report
“Green finance can play two important roles in this transition. First, green finance mobilises and channels money into the low-carbon economic transition, particularly in green technologies and the improved energy and emission intensity of all sectors,” said Christoph Nedopil Wang, a senior research fellow at the International Institute of Green Finance of the Central University of Finance and Economics in Beijing.
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“Green finance also brings more transparency into the risks of non-green finance that financial institutions and investors need to deal with because of climate change,” he added.
Here is what you need to know about green finance in China.
What is green finance?
Although the term “green finance” is increasingly used in many countries, there is no single definition of what constitutes green finance. In the definition by the People’s Bank of China (PBOC), green finance refers to a series of policy and institutional arrangements to attract private capital investments into green industries – such as environmental protection, energy conservation and clean energy – through financial services.