Beijing and Brussels set to release common standards for sustainable finance this year, PBOC official says

China and the EU are expected to publish the first set of common classification standards for sustainable finance by the end of this year, an initiative that aims to facilitate the issuance of green bonds and other investment products. of this type in foreign markets, according to Chen Yulu, deputy governor of the People’s Bank of China (PBOC).

Chen made the comment on Saturday at the annual meeting of the Green Finance Committee (GFC) of the China Society of Finance and Banking.

If adopted, the China-EU Joint Standards will become a set of standards that will allow other countries to recognize China’s green financial assets, said Ma Jun, a member of the PBOC’s monetary policy committee and director of the GFC. “Using these standards to design products and sell them overseas can avoid the cost of double certification. Ma said at the meeting, adding that such standards can help promote the issuance of cross-border green investment products.

The common China-EU taxonomy is formulated on the basis of Chinese and European standards, which means that after its publication, China’s green bonds issued abroad will be “automatically” recognized by the European capital market while European institutions can also issue green bonds in China. panda bond market, ”Ma said.

Other regions such as Hong Kong may also adopt the common standards after they are released, he said.

An industry insider told Caixin that the size of China’s green bond issuance ranks second by national standards and about fifth by European standards. The reason for the disparity was that some green bond products that Chinese institutions were selling overseas were based on domestic standards and not recognized as such by the international market, the person said.

China has made positive progress in green finance over the past year, including developing standards, disclosing environmental information, as well as creating products and strengthening international cooperation, Chen said.

Chen said the country should expand its pilot green finance program to cover more areas and increase international cooperation to achieve its ambitious carbon targets. He also suggested that institutions in the pilot regions launch green financial products for the global market on the basis of common China-EU classification standards.

Chinese financial regulators have been work in various ways finance can play an important role in the country’s green transition, in particular develop carbon markets and green financing. In 2017, the State Council, the Chinese government, established pilot zones in six provinces for green finance reform and innovation, after several government agencies, including the central bank, published 2016 guidelines (link in Chinese) to create a green financial system to encourage more investment in green projects rather than polluting ones.

The world’s largest greenhouse gas emitter has committed to peak carbon dioxide emissions by 2030 and become carbon neutral by 2060.

The comments on the common China-EU standards come after Zhang Bei, deputy director of the PBOC’s financial institute, told the 2021 Caixin Summer Summit in Beijing in June that the final version of the China-Common Taxonomy EU for green finance was planned to be finalized by the end of this year.

Green finance refers to fundraising and investment targeting sustainable development projects and low carbon technologies. It is part of sustainable finance which requires investors to take into account environmental, social and governance factors when making investment decisions in the financial sector, according to the European Commission.

Chinese authorities released on Friday a basket of rules and standards (link in Chinese) to crack down on misconduct in the green finance industry, including agencies that engage in greenwashing by making false or exaggerated claims about their contributions to sustainability. The move marked the launch of a market-driven assessment mechanism targeting institutions that assess and verify green bonds.

The authorities said the rapid development of the green finance market has been accompanied by problems, including inconsistent market standards, inadequate information disclosure, and a lack of regulation of assessment and certification in the industry. related businesses.

Chen said the balance of green loans in domestic and foreign currencies in China reached 14 trillion yuan ($ 2.2 trillion) at the end of June, up 26.5 percent year-on-year. The country issued more than 350 billion yuan of green bonds in the first eight months, up 152% year-on-year, of which more than 180 billion yuan of carbon neutral bonds were issued.

Contact reporter Wang Xintong ([email protected]) and editor-in-chief Michael Bellart ([email protected])

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