As one of the first green finance reform and innovation pilot zones, Huzhou took the lead in issuing the Implementation Opinions on Facilitating the Construction of a Pilot Zone for Green Finance Reform and Innovation and Exploring the Construction of a Low-Carbon Transition Financial System (the Opinions) under the guidance of the Green Finance Committee (GFC), China Society for Finance and Banking. The city aims to outline the systematic development pathway of transition finance, and contribute to realize the goals of carbon peaking and neutrality in an orderly way.

The Opinions requires us to apply the new development philosophy in full, to the letter and in all fields of our work, with focus on “Dual Carbon” Targets, under the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era. We should prioritize stability while pursuing progress, and balance carbon reduction with development. In addition, we should innovate the establishment of a low-carbon transition financial system to introduce low-cost and long-term financial support for low-carbon transformation, promote the low-carbon transformation of carbon-intensive industries in a scientific and orderly manner, and help Huzhou promote green and low-carbon development and conduct green finance reform. The Opinions focuses on the financial needs of carbon-intensive industries for low-carbon transformation, high-carbon enterprises for efficient development, and low-carbon transformation technology applications, and promotes positive interactions between finance and carbon-intensive industries from the following seven aspects.

1. Build the standards of transition finance.

The Opinions has defined the scope of low-carbon transition activities in terms of projects and industries, compiled a list of transition projects, a catalogue of project types eligible for transition finance, and a technical guidance to low-carbon transition, established an target setting system as well as an information disclosure framework of transition finance.

1. Improve policy incentives.

Efforts will be made to coordinate policies on industries, energy use, finance, among others, establish incentive mechanisms for transition finance, such as interest subsidies and risk compensation, and leverage decarbonization tools and other policies to optimize the allocation of financial resources in low-carbon transition.

1. Innovate transition financial services.

A multi-level transition financial service system based on credit, insurance, bonds, and funds will be built, and financial carbon account systems and their application scenarios will be created, driving market entities to march towards low-carbon transition along a clear trajectory.

1. Build digital intelligence-pillared platforms.

Digital technology and mindset will be applied to build an integrated digital platform for transition finance, where carbon account data sharing is provided at the front end, algorithm support such as carbon accounting and carbon performance evaluation at the mid end, and financial services such as credit and guarantee at the back, providing online financial services and accurate carbon accounting.

1. Construct an open and cooperative ecology.

Endeavors will be made to build an ecosystem for the innovative development of transition finance across the industrial chain, introduce professional institutions, and attract professional talents. Communication and cooperation with international financial institutions and organizations will be strengthened to facilitate the exchanges in terms of standards, concepts and technologies. This will help us continuously improve the ability of low-carbon transition.

1. Prevent and control transition financial risks.

Information disclosure of transition finance will be strengthened. Financial institutions will be encouraged to conduct transition risk stress testing and incorporate climate risk management into the framework to improve climate resilience.

1. Launch demonstration projects.

The development model of transition finance will be formed by carrying out pilot projects in key industries, regions, and financial institutions.

About Transition finance

Transition finance refers to financial services with diverse instruments that are provided to market entities, economic activities and asset projects. It is an essential supplement to the green financial system and can help the decarbonization of large emitters, especially those with a record of high carbon intensity and environmental risks.

Source: The official Wechat account of the GFC, China Society for Finance and Banking