The People’s Bank of China’s (PBoC) green finance instruments have now provided over US$31bn to banks in the country, according to governor Yi Gang. He said the policies are supporting emissions reduction of over 60mn tonnes of carbon dioxide, equivalent to 0.6% of China’s total.
The PBoC launched its carbon emission reduction facility (Cerf) in November 2021, alongside a special instrument to encourage the green and efficient use of coal. Both facilities provide funds to qualifying lenders at an interest rate of 1.75%. Banks drawing on the Cerf are required to provide audited results for the emissions reduction they support.
However, concerns have been raised over the credibility of commitments made by the Cerf’s beneficiaries, following revelations of fraudulent practices being used by Chinese carbon auditing firms. Norman Waite, an analyst at the Institute for Energy Economics and Financial Analysis, told Green Central Banking that making a credible assessment of the Cerf’s impact will only be possible once third-party audits have been conducted.
The PBoC has acknowledged the need for its climate operations to be based on reliable data.
“Information disclosure and strict supervision are needed when we design and implement green monetary policy tools,” Yi told a state broadcaster.
China will promote its climate information disclosure and guard against various “moral hazards”, such as green-washing, low-cost fund arbitrage and green project fraud, he said.
The Chinese environment ministry says it has launched a campaign to clamp down on inaccurate emissions reporting. Earlier this year it charged four carbon auditing companies with tampering and forging of test reports. The ministry has also published a roadmap towards a compulsory environmental disclosure framework for domestic-listed companies and bond issuers by 2025.
Yi said that the need for better information disclosure was a main finding from the PBoC’s climate risks stress test conducted last year. The central bank published the results of the exercise in February, and has since revealed plans to conduct a more expansive exercise to assess how climate risks in eight industries, including aviation and petrochemicals, could affect bank balance sheets.
Yi also confirmed that China’s outstanding green loans exceeded US$2.69tn as of March, while outstanding green bonds reached around US$194bn.
This page was last updated June 29, 2022
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