Financial Services Association, April 16 (Reporter Gao Ping) China's green finance development is progressing rapidly. Statistics from the Finance Association reporter found that A-share banks that have now disclosed their 2023 annual reports achieved a marked increase in green credit balances at the end of last year compared to the beginning of the year. Among them, green credit balances at the end of 2023, such as Bank of China and Everbright Bank, all increased by more than 50% compared to the end of the previous year.

Recently, seven departments including the People's Bank of China jointly issued the “Guiding Opinions on Further Strengthening Financial Support for Green and Low-Carbon Development”, which clearly sets out China's green finance development goals for the next 10 years. Industry insiders believe that the guidance is a further enrichment and implementation of the “three major functions” and “five pillars” green finance development policy ideas. Under the new situation of China's green and low-carbon development, it has formed top-level guidelines for the next stage of green finance development in China. This provides systematic guidance for China's financial institutions and supervisory authorities to prepare major green finance articles.

Green finance is developing rapidly. The double-digit increase in the size of the bank's green loan business in 2023 is standard

In recent years, China's green finance development has achieved remarkable results. According to data from the People's Bank of China, as of the end of 2023, China's domestic and foreign currency green loan balance was 30.08 trillion yuan, ranking first in the world, with an average annual growth rate of more than 20% over seven years; the cumulative issuance of labeled green bonds in China exceeded 3.4 trillion yuan. Over the past seven years, the average annual growth rate of newly issued green bonds remained around 20%.

The rapid development of green finance can also be seen from the 2023 annual reports of some A-share banks that have been disclosed so far. According to Dongcai Choice data, out of the 25 banks that can be counted with green credit balance data, 18 banks achieved a green credit balance increase of more than 20% at the end of 2023 compared to the beginning of the year.

Among major banks, the annual report shows that ICBC's green loans of the General Administration of Financial Supervision at the end of 2023 were close to 5.4 trillion yuan, an increase of nearly 1.4 trillion yuan over the end of the previous year. As of the end of 2023, the Agricultural Bank's green credit balance was 4.05 trillion yuan, an increase of 1.35 trillion yuan over the end of the previous year, a growth rate of 50.1%. The Bank of China and China Construction Bank both had green credit balances of over 3 trillion yuan, or 3.11 trillion yuan and 3.88 trillion yuan respectively, up 56.34% and 41.19% respectively from the end of the previous year.

In addition to green loans, the scale of green bonds, green trusts, etc. continues to grow, and green finance products are also constantly innovating. The development of green finance is inseparable from top-level design support. “In 2016, seven departments including the People's Bank of China issued the “Guiding Opinions on Establishing a Green Finance System” (hereinafter referred to as the “Opinions”), and China's top-level green finance design was initially constructed. Guided by the idea of 'three functions and five pillars', China's green finance development is at the forefront of the world.” Wang Yao, dean of the International Institute of Green Finance at the Central University of Finance and Economics, said.

Peng Wensheng, chief economist of CICC and director of the CICC Research Institute, also said that the “Opinion” has laid a critical institutional foundation for the development of green finance in China. Over the past seven years, China has initially established a multi-level green finance product system covering green loans, green bonds, green insurance, green funds, green trusts, and carbon finance products.

“The “Opinion” can have such a huge impact because it forwardly guides the financial system to support the core tasks of the real economy, such as advancing supply-side reforms and the conversion of old and new kinetic energy, and promoting a green and low-carbon transformation. According to CICC estimates, in the past few years, loans related to green, infrastructure, manufacturing, and inclusion have increased dramatically, and the share of new loans has risen from more than 30% before the pandemic to more than 70% in early 2023. Policy finance such as green finance has maintained reasonable credit growth and mitigated the impact of the decline in real estate loans on the economy.” Peng Wensheng added.

Setting medium- to long-term green finance goals, market players form stable expectations

Recently, seven departments including the People's Bank of China jointly issued the “Guiding Opinions on Further Strengthening Financial Support for Green and Low-Carbon Development” (hereinafter referred to as the “Guiding Opinions”), which clearly sets out China's green finance development goals for the next 10 years. The main goal is that in the next 5 years, the world's leading financial support system for green and low-carbon development will be basically established; by 2035, various economic and financial green and low-carbon policies will be promoted collaboratively and efficiently, the standard system and policy support system for financial support for green and low-carbon development will be more mature, and resource allocation, risk management, and market pricing functions will be better utilized. Peng Wensheng believes that this provides systematic guidance for China's financial institutions and supervisory authorities to write big green finance articles.

Wang Yao also said that the “Guiding Opinions” are based on the reality of China's development, further deepening the 2016 “Opinions” and making comprehensive arrangements for policies and standards, products and markets, risk management, international cooperation, institutional guarantees, etc., which will better guide financial institutions and related entities to write big green finance articles, serve the transformation of the real economy, and comprehensively promote China's green and low-carbon development.

“Entering a new stage of green transformation, the core task of green finance in China is also gradually shifting from focusing on 'quantity' to improving 'quality'.” Peng Wensheng pointed out that the “Guiding Opinions” put forward new guidance on this new task. There are several points worth paying particular attention to. One is the establishment of medium- to long-term green finance goals to help market players form stable expectations and make longer-term action plans based on this; second, it emphasizes the establishment of an environmental information disclosure system covering different types of financial institutions, which highlights the important role of the financial system in optimizing the green finance standard system.

Third, it emphasizes strategies that place equal emphasis on “high-carbon production capacity transformation” and “green production capacity development,” focusing on supporting the green and low-carbon transformation of high-emission industries and high-emission projects, and mentioning speeding up the construction of a standard system related to transformation finance; fourth, strengthening research on financial products linked to carbon emission rights and gradually expanding the scope of financial institutions suitable for participating in carbon market transactions, which will help expand the boundaries of green finance products; fifth, promote compatibility between Chinese standards and international standard systems, bringing greater convenience to the cross-border circulation of domestic green capital and international capital investment in China's green and low-carbon assets.

Regarding the credit disclosure system, Wang Yao also said that in the “Guiding Opinions”, great importance is attached to sustainable information disclosure work, and the requirements for the quality of information disclosure have been raised. Good disclosure of sustainable information will effectively guide assets into green and low-carbon projects while improving financial institutions' own environmental performance and risk management.

Wang Yao further said that at present, the People's Bank of China has issued the “Environmental Information Disclosure Guidelines for Financial Institutions”, and various green finance reform and innovation pilot zones are also promoting regional sustainable information disclosure work according to local conditions. On the basis of exploration and practice, they establish sustainable information disclosure systems covering different types of financial institutions step by step, improve relevant standards, establish and improve rating systems for green financial products, and support credit rating agencies to incorporate environmental, social and governance (ESG) factors into credit rating methods and models, which will help further promote the development and implementation of green finance and transformation financial products. Fund allocation to promote the orderly gathering of various factor resources in the green and low-carbon sector.

Green finance and transformational finance will be deeply integrated. Wang Yao pointed out that the “Guiding Opinions” suggest supporting the green and low-carbon transformation of high-emission industries and high-emission projects, and clearly requires the connection between green finance and transformation finance. Under the guidance of the “Guiding Opinions”, green finance and transformational finance will be deeply integrated to contribute to the construction of a green and low-carbon development system in China.