Key highlights:
- – Chinese government slowly transitioning towards financing sustainable projects
- – President Xi Ping promises to achieve carbon neutrality by 2060
- – Other finance enterprises also invest in green financing
China Aims to Achieve Carbon Neutrality by 2060
Climate change has become a serious global concern. Major enterprises and organizations are opting for more sustainable and eco-friendly tactics to combat major carbon emission issues and fight global warming. In the current situation, what seems feasible and practical for major banking institutions is the adoption of ‘Green Financing’.
Green Financing
Central banks and financial authorities are playing major roles in promoting transition towards a sustainable global economy by preaching green financing. The Chinese government is slowly transitioning towards financing sustainable projects and incentives. Recently, China’s President Xi Jinping promised to combat and tackle serious climate issues by instituting and adapting the method of green financing.
Green Financing Practices in China
Recently, China’s President Xi Jinping has promised to bring the country’s climate-warming greenhouse gas emissions to a peak before 2030 and achieve carbon neutrality by 2060, committing the country to an accelerated transition to renewable energy.
According to Xi Jinping, the central bank will give incentives to financial institutions to support such transitions and will unveil new tools to boost financing for carbon emission cuts. The central bank will also extend its support for green finance through ratings of commercial banks, deposit insurance rates and macro prudential assessments.
“We will urge financial institutions to make transitions as early as possible,” Yi said.
He further added that China will continue to increase the allocation of green bonds in its foreign exchange reserve investments while controlling investments in high-pollution assets. The central bank will assess the impact of climate change on China’s financial stability and monetary policy, and consider climate change in financial sector stress tests.
Other Green Financing Initiatives
Alongside, China’s largest insurer, Ping An Insurance has announced a set of green finance activities and has also set quantitative performance targets for each. Pin An aims at supporting China’s goal of attaining carbon neutrality by 2060, help combat global climate change and promote sustainable social development through these initiatives. Ping An has set vivid action paths in four key areas to help achieve green performance targets. These are:
Providing Green loans, Green investments, Green insurance and matching asset-liability management with reference to the risks in climate change.
Importance of Transition to Green Financing
Green finance refers to financial investments in sustainable development projects and initiatives, environmental products, and policies that encourage the sustainable development of the economy. The financial sector plays a key role through its intermediary functions and risk management in advancing sustainable economic development while directing investment to the real economy. Hence, the incorporation of these two factors is essential.
Green Finance Initiatives have also been addressing the 2030 Sustainable Development Goals (SDG’s) Agenda by emphasizing the shift of focus from shareholders’ value creation (economic) to the generation of stakeholders’ value (economic, environmental, and social). Moreover, Green Finance represents the future of the finance sector by the implementation and support towards investments in projects with positive and sustainable approaches.
Also read, Green Buildings: Eco-Friendly Way To Preserve Scarce Resources
