China issues Guidance Policy for Climate Investment and Finance
Guidance for Promoting Climate Investment and Finance
To all Provincial, Autonomous Regional and Municipal Departments (Bureaus) of Ecology and Environment and Development and Reform Commissions, the Xinjiang Production and Construction Corps Ecology and Environment Bureau, and Development and Reform Commission; the People’s Bank of China Shanghai Head Office, Branches and Operations Offices, Provincial Capital Central Sub-branches, Municipal Central Sub-branches; all Offices of China Banking and Insurance Regulatory Commission; all Offices of China Securities Regulatory Commission; all policy banks, large banks and joint-stock banks:
In order to fully implement a series of major decisions and arrangements of the Communist Party of China (CPC) Central Committee and the State Council on actively responding to climate change, better play the supporting role of investment and financing in response to climate change, promote the implementation of China’s Nationally Determined Contribution (NDC), and boost green and low-carbon development, the following Guidance are hereby put forward.
1. General Requirements
1.1 Theoretical Guidance
- Guided by Xi Jinping's thought on Socialism with Chinese Characteristics for a New Era, we shall comprehensively adhere to and implement the essence of the 19th CPC National Congress, and its 2nd, 3rd and 4th Plenary Sessions of the 19th CPC Central Committee, thoroughly implement Xi Jinping's concept of the ecological civilization and the National Working Conference on Ecological and Environmental Protection and therefore commit to a new development philosophy,seek to make overall “five-sphere integrated plan”  and make comprehensive moves to the “four-pronged comprehensive strategy”, and actively implement the national climate change strategy.
- Guided by the NDC targets and low-carbon development goals, supported by the policy and standards systems, and led by development model innovation and local practices, we shall vigorously promote the development of investment and finance to address climate change (hereinafter referred to as climate investment and finance), in order to guide and leverage more social funds into climate change related fields, and further stimulate potentials, open up markets; and promote the formation of energy structures, industrial structures, production modes and lifestyles that mitigate and adapt to climate change.
1.2 Basic Principles
Target-driven: we shall closely follow the NDC targets and low-carbon development goals and promote investment and finance activities to better serve the goals, policies and actions, such as reducing carbon emission intensities, peaking carbon emissions in 2030, increasing the share of non-fossil energies in primary energy consumption, and increasing the forest stock volumes.
Market-orientation: let the market play the decisive role in climate investment and finance, the government better play its guiding role, and the financial institutions and enterprises play the role in the innovation of models, mechanisms and financial instruments.
Differentiated policies: Need to fully consider existing local conditions, and accordingly implement differentiated climate investment and finance developmental paths and methods. Need to actively create a policy environment conducive to the development of climate investment and finance and promote the formation of replicable and extendable advanced climate investment and finance experience and best practices.
Open cooperation: Need to promote development through openness and cooperation; promote the integration of climate investment and finance into the One Belt, One Road initiative; actively participate in the formulation and revision of international standards for climate investment and finance; and promote the application of Chinese standards in overseas investment and constructions.
1.3 Main Objectives
By 2022, we shall:
-Create a policy environment conducive to the development of climate investment and finance, and promote the establishment of relevant standards for climate investment and finance in an orderly manner;
-Launch local pilots for climate investment and finance, achieve initial results; and continuously expand the scale of professional research institutions for climate investment and finance;
-Enhance international cooperation; and
-Accumulate initial funds, talents, technologies and other key elements and resources for climate investment and finance.
By 2025, we shall:
- Promote climate change policies and policies in investment, finance, industry, energy and environment in an efficient and coordinated way;
- Gradually improve climate investment and finance policies and a standards system;
- Form a systemic portfolioof local pilot, comprehensive demonstration, project development, institutional responses and extensive institutionalparticipation;
- Guide the establishment of an internationally influential climate investment and finance cooperation platform; and
-Significantly raise the scale of funds invested in climate change related fields.
1.4 Definitions and Scope of Support
Climate investment and finance refers to the investment and finance activities that guide and promote more investments in the field of climate change, in order to achieve the NDC targets and low-carbon development goals. It is an important part of green finance. The scope of support of climate investment and finance covers two aspects: climate mitigation and adaptation.
(1) Climate Mitigation includes:
- Adjusting the industrial structure and actively developing strategic emerging industries;
- Optimizing the energy structure and vigorously developing non-fossil fuel energies;
- Conducting pilot demonstrations of CCUS technologies;
- Controlling GHGemissions from non-energy activities such asindustry, agriculture and waste management;and
- Enhancing forest, grassland and other carbon sinks.
(2) Climate Adaptation includes:
- Improving adaptability in key sectors such as agriculture, water resources, forests and ecosystems, oceans, meteorology, disaster prevention, mitigation and relief; and
- Improving capacity building on adaptation, accelerating the construction of climate resilience infrastructure, and improving scientific and technological capabilities.
2. Accelerating the Establishment of a Climate Investment and Finance Policy System
2.1 Strengthen Environmental and Economic Policy Guidance
- Promote the establishment of an environmental and economic policy framework for addressing climate change, and fully utilize environmental and economic policies in guiding initiatives that address climate change;
- Accelerate the establishment of a National Climate Investment and Finance Project Pipeline and explore high-quality low-carbon projects;
- Promote the establishment of a platform to facilitate communication between the demand and supply sides of low-carbon project funds, and strengthen collaboration between industry and financial sectors in low-carbon areas; and
-Research and design product and service requirements that meet standards of low-carbon development, promote low-carbon procurement and consumption, and continuously cultivate the market and expand demand.
2.2 Strengthen Financial Policy Support
- Improve financial regulatory policies, promote the development of financial markets, and support and incentivize various types of financial institutions to develop climate-friendly green finance products;
- Encourage financial institutions to provide effective financial support for major climate projects based on their own functional positioning, development strategies, risk perception and other factors, under the premise of risk control and sustainable business modelling;
- Support qualified climate-friendly companies to finance or refinance through the capital market;
- Encourage the promotion of small and micro enterprises and the public to participate in climate change actions through market-based mechanisms; and
- Effectively prevent and resolve climate investment and finance risks.
2.3 Strengthen Policy Coordination
- Clearly define the responsibility and rights of competent authorities, improve coordination across departments, and integrate climate change factors into the formulation of macroeconomic and industry sector policies in order to generate coordinated policy synergy; and
- Accelerate the promotion of a systematic response between climate investment and finance-related policies and the realization of the country’s mid- and long-term strategic goals and nationally determined contributions to address climate change and low-carbon development.
3. Gradually Improve the Climate Investment and Finance Standards System
3.1 Coordinate and Promote the Establishment of a Standards System
-Fully utilize the guidance impact and the compulsory advancing effect of standards in climate investment and finance activities, and accelerate the establishment of a climate investment and finance standards system that is demand-led, innovation-driven, coordinated and practical,
-Coordinate climate investment and finance standards and green finance standards to facilitate the use and promotion of standards, and
-Promote the internationalization of climate investment and finance standards.
3.2 Formulate Climate Project Standards
- Taking climate benefits as a metric, and linked to the existing technical standards system and the Green Industry Guidance Catalogue (2019), we shall research and explore the formulation of issuance of technical standards for climate-friendly projects and publish key support climate projects to promote climate investment and finance, and
- Promote the establishment of a third-party verification system for climate-friendly projects and encourage third-party verification of climate finance-related products and services.
3.3 Improve Climate Information Disclosure Standards
- Accelerate the formulation of information disclosure standards for climate investment and finance projects, entities and funds, and promote the establishment of a climate information disclosure system that ensures corporate public commitments, legal information disclosure and extensive social monitoring, and
- Clarify the policy boundaries of climate investment and finance, promote the research on climate investment and finance statistical metrics, encourage the establishment of a climate investment and finance monitoring platform, and centrally manage the use of relevant information.
3.4 Establish Climate Performance Assessment Standards
- Encourage credit rating agencies to integrate environmental, social and governance (ESG) factors into their rating methods to guide capital flow to sustainable development areas, and
- Encourage scientific evaluation and social monitoring of the climate performance of financial institutions, enterprises and regional governments.
4. Encourage and Guide Private Investments and Foreign Capital into Climate Investment and Finance
4.1 Stimulate the Power and Vitality of Private Capital
Strengthen the guiding mechanism and model design for leveraging market funds invested in the climate field; support the effective mobilization and leveraging of private capital in various forms in climate investment and finance; encourage collaborative models of “government-bank-guarantee agencies”, “government-bank-insurance company”, “bank loans plus risk guarantee compensation”, and “tax finance”; establish mechanisms for loss sharing, risk compensation and guarantee credit enhancement in accordance with the law; and standardize and promote public and private capital partnership (PPP) projects.
4.2 Give Full Play to the Stimulating and Restrictive Role of the Carbon Emission Trading Mechanism
- Promote the establishment of a carbon emission trading mechanism, continuously improve the accounting recognition and measurement of carbon assets, establish a sound carbon emission trading market risk control mechanism, gradually expand the scope of trading entities and increase the participation of investment institutions and individuals in carbon emissions trading in accordance with trading rules;
- Under the premise of risk control, support institutions and capital to actively develop financial products and services related to carbon emission allowances, and to explore and operate derivatives and businesses such as carbon allowance futures in an orderly manner, and
- Explore the establishment of a market-based carbon investment fund which uses carbon emission reductions as a quantitative criterion in assessing project benefits.
4.3 Introduce International Funds and Foreign Investors
-Further strengthen practical cooperation with international financial institutions and foreign enterprises in the field of climate investment and finance, and actively draw on good international practices and financial innovations;
-Support the cross-border transfer of eligible green financial assets in China, support the continuous enrichment of RMB green financial products and transactions in the offshore market, and continuously promote the facilitation of climate investment and finance;
-Support China's financial institutions and enterprises to conduct climate finance abroad, actively explore credit enhancement for foreign finance through the use of sovereign guarantees, and support the establishment of RMB green overseas investment and loan funds; and
-Support and guide Qualified Foreign Institutional Investors (QFII) to participate in climate investment and finance activities in China, encourage foreign institutions to issue green financial bonds in China, encourage foreign investors to invest more in holding domestic RMB green financial assets, and encourage the use of RMB as the cross-border settlement currency for related activities.
5. Guide and Support Local Practices in Climate Investment and Finance
5.1 Launch Local Climate Investment and Finance Pilots
-In accordance with the deployment of the State Council on regional financial reform, actively support regional pilots for green finance,
-Select regions with a strong willingness to implement, with better basic conditions, potential driving force and representations, and carry out climate investment and finance pilots focused on investment policy guidance and strengthened financial support.
5.2 Create an Enabling Local Policy Environment
-Encourage local governments to strengthen fiscal support and constantly improve climate investment and finance-related supporting policies;
-Support local efforts in formulating negative screening lists to curb high-carbon investments, innovate incentive and restraint mechanisms to promote corporate emission reductions, guide regions to prepare for establishing a climate project pipeline, further improve the linkage mechanism of funding arrangements, provide favourable conditions for the use of multi-channel finance, and ultimately promote the development of low-carbon industries.
5.3 Encourage Innovative Climate Investment and Finance Models and Instruments at a Local Level
- Encourage local governments to explore differentiated investment and finance models, organizational forms, service methods and innovative management systems around the objectives and priorities of addressing climate change;
- Encourage banking institutions and insurance companies to set up special branches (departments) or make climate investment and finance an important part of green branches (sectors);
- Encourage the establishment of regional climate investment and finance industry promotion centres; and
- Support local and international financial institutions and foreign enterprises to initiate climate investment and finance cooperation.
6. Strengthen International Cooperation in Climate Investment and Finance
- Actively promote bilateral and multilateral collaboration in climate investment and finance and carry out third-party market cooperation in key countries and regions;
- Encourage financial institutions to support the low-carbon development of the Belt and Road and South-South cooperation and promote the implementation of climate mitigation and adaptation projects abroad;
- Standardize the investment and finance activities of financial institutions and enterprises abroad, promote them to actively fulfil their social responsibilities, and effectively prevent and mitigate climate risks; and
-Actively carry out research and international cooperation on climate investment and finance standards and promote the application of Chinese standards applied in overseas investment and construction.
7. Intensify Organization and Implementation
-Relevant departments shall attach great importance to climate investment and finance, strengthen communication and coordination for greater synergy;
-MEE will work closely with NDRC, PBOC, CBIRC, CSRC and other departmentsto establish a coordination mechanism, and jointly promote climate investment and finance.
- Relevant departments shall, based on a clear division of responsibilities, further refine the target tasks and policy measures to ensure that the tasks identified in this guidance document to be accomplished.
Ministry of Ecology and Environment
National Development and Reform Commission
People's Bank of China
China Banking and Insurance Regulatory Commission
China Securities Regulatory Commission
(The document is open to the public)
Printed by the General Office, Ministry of Ecology and Environment on 21/Oct/2020
Translated by the Editorial of Climate Investment and Finance for Promoting Ecological Civilisation Construction Platform (CIFE)
Proofread by Wang Li and Hasan Muslemani
Economic, political, cultural, social, and ecological progress, known as the Five-point Strategy.
Complete a moderately prosperous society in all respects, further reform, advance the rule of law, and strengthen Party discipline, known as the Four-pronged Strategy.