China set to finalise biodiversity taxonomy

Key points

• The People’s Bank of China (PBoC) is set to finalise its draft biodiversity finance taxonomy this year following a pilot rollout across 26 provinces and municipalities since 2025.

• The catalogue covers 87 activities across four core categories, including natural resource sustainability, restoration and nature-based solutions, using standardised, measurable indicators to simplify bank reporting and cut transaction costs.

• Modelled after China’s successful green bond market, early pilot facilities have already driven billions of RMB into biodiversity-linked loans, including sustainable agriculture, forestry and aquatic habitat projects.

• Former PBoC chief economist Ma Jun notes the framework may become the world’s first formal biodiversity taxonomy, with the potential to shift from voluntary pilots to mandatory bank reporting to drive institutional adoption.

China’s central bank is moving to finalise its biodiversity taxonomy this year, following pilots across 26 provinces and municipalities, according to a source familiar with the process.

First released in 2025, the draft biodiversity finance catalogue includes 87 entries across four main categories: sustainable use of natural resources, biodiversity conservation and restoration, nature-based solutions and environmentally-friendly activities in highly sensitive industries.

The framework allows banks to identify investment projects that generate positive outcomes for biodiversity, including organic farming, habitat conservation, wetland restoration and wind farms protecting migratory birds.

The People’s Bank of China (PBoC) is looking to replicate its success in spurring green finance through a standardised catalogue of endorsed projects in the nascent biodiversity finance market, said the source familiar with the taxonomy’s development.

“If biodiversity is in the catalogue, banks can get credit from it. And when you bring the money to the table, the market will follow,” he said under anonymity. “We have seen over 15 cases from different provinces in China, and they have invested billions of RMB in these biodiversity projects.”

He added: “Each activity comes with a specific, measurable and environmental indicator… Bankers do not need to be ecologists…They just need to monitor two or three key indicators per project, which makes it more actionable and reduces transaction costs.”

The indicators have been mapped to national and international targets, including the Kunming-Montreal Global Biodiversity Framework, UN Sustainable Development Goals and China’s National Biodiversity Strategy and Action Plan, which “demonstrates Chinese alignment with global commitments,” he said.

Over the past year, several provinces have implemented biodiversity-focused relending facilities and issued their inaugural biodiversity-linked loans.

Hubei Province, through which the main stream of the Yangtze River flows, recorded an outstanding balance of biodiversity loans of 226 billion yuan (US$33bn) at the end of the second quarter of 2025, up 31%  from the end of 2024. 

The province introduced a relending programme focused on sustainable agriculture, which has funded a project to reduce waste in Zigui County’s renowned navel orange industry. It also issued its first sustainable forestry loan in Shiyan City, aligned with the draft biodiversity taxonomy.

Last year, the Agricultural Bank of China issued a 10 million yuan ($1.5bn) biodiversity loan to Three Gorges Group’s Fujian branch for an offshore solar project designed to support aquatic life and biodiversity through structures that function as artificial reefs.

In March, state-owned Dezhou Bank issued Shandong Province’s first biodiversity-linked loan of 45 million yuan ($6.7bn), under which borrowing costs fall as the protected number of wildlife species increases.

On a national level, China recently consolidated its existing environmental legislation into a single code, which will take effect on 15 August.

In its latest five-year plan for forestry and grassland conservation, China also unveiled new targets to increase forest coverage to 25.8% by 2030, raise forest stock volume to 22.4bn cubic metres and provide early-warning monitoring for 165 critically endangered wildlife and plant species under state protection.

Replicating green finance’s success in biodiversity

Former PBoC chief economist Ma Jun told Green Central Banking that, once finalised, it “may be the first biodiversity taxonomy in the world.”

Ma, a key architect of China’s green finance ecosystem, expects PBoC to make the guidelines mandatory after a period of experimentation. He currently chairs the Capacity-building Alliance of Sustainable Investment, an international platform launched at COP28.

“If [PBoC feels] it’s durable, not very costly and does generate incentives, it may move towards becoming mandatory,” said Ma. “That’s very important. In fact, when we put out the green bond taxonomy, it became mandatory immediately, largely for reporting purposes.”

China became the world’s largest green bond issuer within a year of releasing its green bond catalogue in 2015. 

Mandatory reporting of green loans and their environmental benefits was critical, as it allowed for comparisons in the green performance across banks using the green loan ratio, said Ma.

“The average green loan ratio in China is 17% and the higher ones, like in Huzhou, are 34%. The lower ones in some of the banks may be only 5%. Once you put the numbers out, it immediately becomes an incentive,” Ma explained.

“The ones with lower ratios will feel very uncomfortable. The head of the green banking department will face challenges from his boss about why the bank’s ratio is so low, right? This kind of incentive or pressure is very useful. It’s sometimes even more useful than monetary incentives or penalties.”

 

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