NO.319NOVEMBERADB BRIEFS2024KEY POINTSGreen Finance and InformationFor green finance to growand the country's carbonDisclosure in the People's Republictargetsto be met,morecommercial banks and otherof Chinafinancial institutions in thePeople's Republic of China(PRC)must adopt credibleenvironmental informationAngian HuangFang Zhangdisclosure.Principal Financial Sector SpecialistDeputy DirectorSuch transparency bolstersFinance Sector Office,Sectors GroupESG Investment and Financeregulatory compliance,buildsAsian Development BankInstitute of Finance and Sustainabilityinvestor confidence,andgives businesses and banksin today's sustainability-sensitive capital markets.INTRODUCTIONThe Bank of Huzhouhas demonstrated howBig challenges and solutions.While the People's Republic of China(PRC)islocal financial institutionsthe world's leading carbon emitter,it is also a leading manufacturer and adopter ofcan fill the current greenthe renewable energy technology key to battling global climate change and achievingfinance voids in regions andgreen,sustainable development.It dominates the international solar panel market andeconomic segments that thePRC's big banks do not serve.leads the world in solar and wind energy generation.It produces and puts more electricvehicles on the road than any other country.The Bank of Huzhou's criteriaand efficient fintech systemRising green finance.Also notable-and the topic of this brief-is the PRC's successfor accurately collecting,in rapidly scaling up its green finance ecosystem and activity.Only the European Unionmanaging,analyzing,issued a greater amount of green bonds in 2023.The PRC is also a global leader indisclosing,and potentiallygreen lending.2self-certifying environmentalbenefits of projects itSmall but growing role for regional banks.As is often the case in the world's second-finances are replicable andlargest economy,state-owned institutions have led the way,and the big state bankscan catalyze a faster andremain the PRC's main green financiers.Importantly,however,smaller joint-stock andmore efficient spread anddeepening of the greenNotes:In this publication,"CNY"refersto yuan.ADB recognizes"China"as the People's Republic offinance crucial to the PRC'sChina and "Korea"as the Republic of Korea.The authors are grateful for the peer review provided by Thinh Tran,financial market specialist (ClimateFinancing),Finance Sector Office,Sectors Group,Asian Development Bank(ADB).Geeta Keswani,anADB staff consultant,contributed to the editing of the document.1In 2023,a total of $131 billion (equivalent)labeled green bonds originated from issuers in the PRCof which $83.5 billion,or 64%,was aligned with the Climate Bonds Initiative Green Bond DatabaseMethodology.Climate Bonds Initiative.2024.China solidifies leadership in Green Finance for 2023News release.17 May.PRC commercial banks provided the equivalent of $3 trillion to qualified green projects in 2023.Green projects and green lending in the PRC are generally defined according to domestic greenfinance catalogs,standards,and/or taxonomies.Ecological Civilization of China.2024.GreenLending Surpassing CNY3 Trillion [in Chinese].1SBN978-92-9270-984-6(print)1SBN978-92-9270-985-3(PDF)1SSN2218-2675PDF)Publication Stock No.BRF240503-2DO:http://dx.doi.org/10.22617/BRF240503-2ADBADB BRIEFS NO.319city commercial banks-including the Industrial Bank and Bank ofKICK-STARTING AND EXPANDINGHuzhou in the case studies-are expanding green lending at ratesGREEN FINANCEof 30%-50%a year.Initial push through state-owned banks and enterprises.GROUNDWORK LAID THROUGHStrategies,policies,laws,and regulations may not have deliveredSTRATEGIES,POLICIES,ANDthe extent of green finance growth the PRC was seeking all on theirLEGAL FRAMEWORKSown.The government,therefore,kick-started the process andbuilt momentum in the space these enabling steps and directiveshad created by mobilizing the economic heft of state institutions.Early adoption and enabling conditions and space.Much ofGreen finance began primarily as a vehicle for government policythe PRC's progress on green finance can be attributed to strategicand state banks to support the green initiatives the governmentforesight and follow-up policy,legal,and regulatory frameworkswas requiring from state-owned enterprises (SOEs).to create the necessary conditions and space.The government'sgoal to strike a balance between economic development andState-owned Big Four banks still dominant overall.State-ownedenvironmental sustainability was first underlined in 2005,andbanks remain the leaders in PRC green finance.The Industrialthe country's leaders have increasingly emphasized this objectiveand Commercial Bank of China has an estimated $200 billionOne oft-repeated slogan declares that"clear waters and green(equivalent)green loan and bond portfolio focused on renewablemountains"are as important as"mountains of gold and silver."3energy,pollution control,and sustainable infrastructure.The BankThe government's 13th Five-Year Plan,2016-2020 elevated thisof China comes next at $150 billion.The China Construction Bankagenda to the strategic level.4 This was followed in 2020 by thehas extended about $100 billion in funding for large-scale greenPRC's announcement of its targets for peak carbon before 2030infrastructure.The Agriculture Bank of China,the fourth of theand carbon neutrality before 2060.The 14th Five-Year Plan,country's Big Four banks,is also heavily involved.2021-2025 broadened the drive for a lower-carbon economyacross more economic sectors.5Green finance reach extended through pilot zones.Despite orperhaps because of their size,the large commercial banks couldFull slate of laws,regulations,and guidelines.Among the newcover only some key segments of the PRC's huge economy.Thelaws,regulations,and government guidelines that helped propelcountry's State Council moved to address the resulting gaps ingreen finance growth was the Green Credit Guideline (2012)2017 by designating such provinces as Guangdong,Guizhou,issued by the then China Banking Regulation Commission (nowJiangxi,and Zhejiang as green finance reform and innovation pilotthe National Financial Regulatory Administration).5 Othersareas."One aim was to expand the green finance initiatives toincluded the Green Bond Endorsed Project Catalogue (2015)include local SOEs and private sector businesses,including smallissued by the People's Bank of China (the central bank),'andand medium-sized enterprises.Lanzhou New District in GansuGuidelines for Establishing the Green Financial System (2016)Province was added as a new pilot area in 2019,followed by theissued by the Ministry of Finance(MOF),the central bank,and fivemajor central government-administered municipality of Chongqingother government and regulatory agencies.s The Environmentalin2022Protection Tax Law,adopted by the National People's Congress in2018,incentivized greater sustainability in economic activities.TheLocal capacities tested.The pilot program also enabled theGreen Industry Guidance Catalogue,issued in 2019 and updatedcentral government to test how effective local policy,regulatoryin 2024,took the important step of defining what is green and,environments,and local financial systems and institutions couldthus,what is not.The Green Bond Endorsed Project Cataloguebe in nurturing green finance.The need for local innovation and(2021)provided a framework within which the number and use oftechnology support could also be determined,along with thesustainable debt instruments could expand.0general interest in local areas for increased investment and finance.3 People's Daily.2024.Clear Waters and Green Mountains are Gold and Silver mountains [in Chinese].Govemment of the PRC.2015.Outline of the Thirteenth Five-Year Plan for National Economicand Social Development of the People's Republic of China (2016-2020)[in Chinese].Govemment of the PRC.2020.The 14th Five-Year Plan for National Economic and Social Development of the People's Republic of China and the Long-Term Objectivefor 2035 [in Chinese].6China Banking Regulatory Commission.2012.Green Credit Guidelines [in Chinese].7 People's Bank of China.2015.People's Bank of China Notification [in Chinese].Xinhua News Agency.2016.Seven ministries and commissions issued the"Guiding Opinions on Buildinga Green Financial System"[in Chinese].31 August.Govemment of the PRC,National Development and Reform Commission.2024.Notice of the National Developmentand Reform Commission and otherdepartments on the issuance of the "Green and Low-Carbon Transformation Indus try Guidance Catalogue (2024 Edition)"[in Chinese].10 People's Bank of China.2021.Green Bond Endorsed Project Catalogue [in Chinese].11Govemment of the PRC,State Council.2017.China to Build Green Finance Reform and Innovation Pilot Zone [in Chinese].