On Oct 21st, 2020, the Ministry of Ecology and Environment (MEE), National Development and Reform Commission (NDRC), People’s Bank of China (PBOC), China Banking and Insurance Regulatory Commission (CBIRC), and China Securities Regulatory Commission (CSRC) jointly launched a guidance document to promote climate investment and finance in China. The Guidance was marked as a landmark policy move for China to address its financial gaps for its climate change agenda and NDC fulfillment. According to Mr. LI Gao, DG of the Climate Change Department of MEE, climate investment and finance will provide new impetus for China to achieve its emission peaking and carbon neutrality visions.
While green finance has been on the rise, conceptually and operationally in China during recent years, climate investment and finance had also gained some traction. There are often debates and confusion over its fundamentals. The Guidance unpacked five hosts of ideas that shed light on the basics of climate investment and finance and offer prospects to construct a systemic and coordinated pathway till 2025 for this notion, which is still at its primacy in China.
Concept and Scope
The Guidance clarified the aim of climate investment and finance as the investment and financing activities that will guide and motivate more financial flow towards addressing climate change, contributing to NDC’s fulfillment and low-carbon development goals. Climate finance is set to support both mitigation and adaptation efforts.
- Mitigation: increase the carbon sink capacity from the forest, grassland, and others, etc.
- Adaptation: improve adaptability in key sectors such as agriculture, water resources, forests and ecosystems, oceans, meteorology, disaster prevention, mitigation, and relief.
It is noticeable that the Guidance also declared that climate investment and finance are an integrated part of green finance. Significant weight was put on bringing out the policy synergies between these two sectors, align the standardization, build the collective efforts with green finance in piloting, facilitate the financial institutes to grow more capacity in this regard ad devises climate-friendly green finance products. This may give climate finance a head start considering green finance has been put into operation in China for quite a few years.
The tool kits are:
- Climate Investment and Finance Policy System, including establish a National Climate Investment and Finance Project Pipeline and explore high-quality low-carbon projects, more finance policy support, policy coordination efforts.
- Climate Investment and Finance Standard System, including identification metrics, verification, taxonomy, disclosure, and assessment standards.
- Stimulate the Power and Vitality of Private Capital, introduce more models like PPP, and finance products, leveraging the carbon market.
- Introduce International Funds and Foreign Investors.
- Guide and Support Local Practices in Climate Investment and Finance.
- Strengthen International Cooperation in Climate Investment and Finance.
- Intensify Organization and Implementation, MEE will work closely with NDRC, PBOC, CBIRC, CSRC, and other departments to establish a coordination mechanism.
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