Aerial photo taken on April 16, 2021 shows facilities of a solar thermal electricity project in Gonghe County, Tibetan Autonomous Prefecture of Hainan in northwest China's Qinghai Province. (Xinhua/Zhang Hongxiang)
BEIJING, July 22 (Xinhua) -- As a major driving force for achieving the goals of carbon peak and carbon neutrality, green finance will embrace a new round of support policies.
Chinese authorities have frequently sent signals of support for green finance. It is understood that Chinese finance regulatory authorities are quickening the pace to improve the institutional framework of green finance, which is expected to further boost green finance development.
As predicted by industry experts, along with the launch of the national carbon market, the monetary policy instrument of carbon emission reduction may be released in the form of green refinancing.
Several regulatory authorities have made intensive statements to express support for green finance.
On July 6, a meeting of the financial stability and development committee under the State Council clearly put up giving priority to developing green finance in the next phase.
Yi Gang, governor of the People's Bank of China (PBOC), said at the 2021 Green Swan Conference held on June 4 that the PBOC is currently trying to assess the green assets and brown assets of commercial banks, and in future would give consideration to a risk weighting based on the green level of assets.
Meanwhile, the China Banking and Insurance Regulatory Commission also emphasized that it will improve rules and standards, and gradually optimize the institutional framework in the fields of green low-carbon development and green finance.
Starting from July 1, a quarterly evaluation on financial institutions' green finance business issued by the PBOC has been officially implemented. Green credit, green bonds and other green financial business will be included in the assessment scope, and its evaluation results will be incorporated into the PBOC's financial institution ratings and other policy and prudential management tools.
After China's national carbon market started online trading, financial institutions are expected to further step up support for the carbon market development.
The State Council's executive meeting held on July 7 proposed the promotion of green and low-carbon development and the establishment of monetary policy instruments to support carbon emission reduction so as to further push forward the development of clean energy, energy conservation and environmental protection, and carbon emission reduction technologies in a steady, orderly, precise and direct manner, as well as leverage more social funds to promote carbon emission reduction.
Industry analysts believed that the instruments to facilitate carbon emission reduction may be launched in the form of green refinancing.
Wang Yifeng, chief analyst with Everbright Securities said green refinancing, as a directional monetary policy instrument, can provide precise support for green finance, and its refinancing rate is more preferential than medium-term lending facility (MLF) rates.
In addition, refinancing instruments are more flexible and can dynamically adjust the credit line based on actual conditions, which can better guide financial institutions to increase green credit investment at more favorable interest rates, Wang noted.
China's green finance has delivered fast growth with the continuous policy incentives. According to the data from the PBOC, the balance of green loans in RMB and foreign currencies reached 13 trillion yuan by the end of the first quarter this year, up 24.6 percent year on year, and 12.3 percentage points higher than the growth rate of various loans in the same period.
Among them, the balance of green infrastructure industry and clean energy industry amounted to 6.29 trillion yuan and 3.4 trillion yuan respectively, up 25 percent and 17.2 percent year on year, respectively.
Data from Wind Info showed that, as of July 19, the green bonds issued this year had reached a record high of 275.3 billion yuan. As an innovative variety of green bonds, the scale of the first batch of carbon neutral bonds has reached 121.5 billion yuan since they were issued in early February.
Local governments have also strengthened their financial support for the green sector this year.
For instance, Zhejiang Province has taken the lead in issuing the guidelines on stepping up financial support for carbon peak and carbon neutrality, proposing to increase over 400 billion yuan of green loans in 2021 and make green debt financing instrument and green finance bonds grow by over 50 percent year on year.
The Deutsche Bank predicted that China's green finance market may top 100 trillion yuan by 2060, with huge room for development.
Ren Tao, researcher of the National Institution for Finance & Development, said that although financial institutions can not directly participate in carbon market trading yet, they can still support the development of the carbon market through mortgage loans of carbon emissions rights, pledge financing of carbon assets, green credit asset-supported securities, traditional credit financing linked with carbon emission effect, and green finance consulting.
Wang said that in addition to the basic financial services such as bank account opening, settlement through transaction on exchange, and relevant fund regulation, financial institutions can also widely participate in the establishment of financial derivatives in an attempt to provide enterprises with financial businesses such as carbon asset management.
Insiders anticipated that as the national carbon market develops, institutional and individual investors will gradually be included in the carbon market, and the participation of financial institutions in carbon market transactions will be an irresistible trend.
The key to carbon market lies in better liquidity and more efficient pricing, Ren said, adding that without the participation of financial institutions, it is hard to give play to the role of the carbon market in price discovery, expectation guidance, and risk management.
It is predicted that financial institutions will be selectively and periodically allowed to participate in the carbon market trading, Ren added.(Edited by Yang Yifan with Xinhua Silk Road, email@example.com)