China eyes clean development via green finance

BEIJING - China is leveraging financial tools to help green its society and economy.

China may introduce an ESG reporting mechanism for listed firms to require more transparency in disclosing information related with environment, social and governance issues, the China Securities Regulatory Commission (CSRC) said Monday.

The securities market watchdog will also mull developing new commodity futures such as carbon emission permit futures to aid air pollution control and counter climate change.

The authority will focus more on environmental issues when reviewing IPOs or mergers, while more support will be offered to enterprises in green businesses to help them enter and grow in the capital market.

In addition, pilots for green corporate bonds will be expanded as part of efforts to promote green finance.

The CSRC's statement came just days after China held a tone-setting meeting on environmental protection, which aims for a fundamental improvement in the quality of the environment, and basically building a Beautiful China by 2035.

Green finance designed to encourage more private capital into green sectors and stem investment that might pollute the environment is considered to be one of the key approaches to this end.

China announced in 2016 that it will establish a national green finance mechanism, becoming the first country worldwide to make such a move. It also helped push green finance to be included on the G20 agenda.

The country decided last year to turn five provincial regions into pilot zones to explore replicable ways to boost green finance.

China now is one of the world's largest issuers of green bonds, which can ease financing demands for medium-and-long-term green projects as banks are limited in offering such services.

Data from the Climate Bonds Initiative showed that China issued green bonds worth $4.4 billion in the first quarter of this year, ranking second globally.

"The CSRC's key target is to reduce financing costs for green firms, and we have abundant means to achieve that goal," CSRC Vice-Chairman Fang Xinghai said in April.

The Shanghai Stock Exchange rolled out a three-year plan last month with detailed measures to develop green finance such as expanding green bonds, green investment, and international cooperation.

Lan Hong, a senior researcher in green finance at Renmin University of China, said he expects faster development of direct green financing tools like green funds and green securities as current credit-led green capital supply might not be enough to meet surging demand.

The green capital supply should also be used to cater to the growing green lifestyle demands like green buildings, transport, energy and tourism, Lan added.