The People’s Bank of China (PBoC) is introducing a range of new measures aimed at greening the bank’s monetary and financial policies.
Green bonds and green credit will now be included as eligible collateral for the central bank’s lending facilities, investments will be limited in high-carbon assets, and more green bonds will be added to China’s foreign exchange reserves.
Bank Governor Yi Gang announced the measures in a speech delivered to the Boao Forum last week. A new taxonomy of projects eligible for green bond issuance has also been issued.
Yi added that the PBoC will also increase its support for green finance through ratings of commercial banks, deposit insurance rates and macro prudential assessments. He also reiterated plans to incorporate climate change factors in bank stress tests, noting that China will require financial institutions to transition towards green finance as early as possible in support of national targets to reach carbon neutrality by 2060.
The announcement follows Yi’s earlier warning about the effects of climate change on financial stability at a recent seminar on green finance and climate policy. “Central banks could contribute to the net zero goal in many ways,” Yi said, while emphasising the role of carbon pricing. China’s national emissions trading system is due to start trading in June, following its launch in February.
The PBoC also previously announced plans to set up a mandatory disclosure for climate-related financial risks, and promote greater information sharing between financial institutions and companies.
The new measures cement the PBoC’s position as a global leader in green central banking. The bank was one of six founding members of the Network for Greening the Financial System and has been an active contributor to international forums on green finance and central banking.
Despite substantial deficiencies, recent independent research on the climate-related policies of central banks and financial supervisors put China and the PBoC in first position among G20 nations.
This page was last updated April 29, 2021
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