Interview: Expectations high on China’s green finance market toward sustainable growth

China’s green finance market is in full swing, thanks to the rapid expansion of green industries and low-carbon transformation of traditional sectors amid the country’s drive to promote sustainable development, an industry specialist told Xinhua in an interview.

“Climate investment and financing have gradually become new breakthroughs of green finance amid the solid progress of global climate governance and carbon neutrality,” said Li Jing, partner of climate change and sustainability services at Ernst & Young (EY) Greater China.

Considering China’s carbon peaking and neutrality goals, she is optimistic about sectors related to climate change and green growth in the country.

Li took China’s carbon trading market as a typical example, saying the country’s national carbon market “provides an important incentive to advance low-carbon and green transition.”

The market helps optimize China’s industrial and energy structures by encouraging energy-intensive industries to make technological innovations and offer more products that are energy-efficient and environmentally friendly, she added.

Launched in July 2021 as an important scheme for China to reduce its carbon footprint and meet emissions targets, the market is the world’s largest in terms of the amount of greenhouse gas emissions it covers.

In the first year of operation, it included 2,162 power-generating enterprises, covering about 4.5 billion tonnes of CO2 emissions. As of mid-July this year, its total trading volume had reached 194 million tonnes.

Li is upbeat about the future of the carbon trading market, expecting wider inclusion of high-emission sectors. She is also impressed by China’s progress in establishing various carbon trading centers, citing the soon-to-open international trading center for ocean carbon sink in Hainan as an example.

According to an overall plan of the Ministry of Ecology and Environment, from 2021 to 2025, the national carbon market will cover eight high-energy-consuming industries, including power generation, iron and steel, construction materials, non-ferrous metals, petrochemicals, chemicals, paper manufacturing and aviation, with a total of approximately 8,500 large emission-intensive enterprises.

In terms of foreign investment utilization, Li said “the establishment of China’s national carbon market helps improve the quality of foreign investment by attracting more capital to green industries, while reducing investment in energy-intensive sectors.”

She also underlined the importance of transition finance in promoting low-carbon growth. “It offers financial support to the low-carbon transformation of market entities, economic activities and projects, especially those with large amounts of carbon emissions or having strong negative impacts on the environment, to assist them in upgrading technology, saving energy and reducing carbon emissions,” she said.

Hailing China’s efforts in further opening up the financial sector, Li highlighted future opportunities for foreign investors in multiple fields, especially regional development.

Eyeing the opportunities related to green development in the Guangdong-Hong Kong-Macao Greater Bay Area, EY China has signed an MoU with the China Emissions Exchange, she said.

The two sides will work together to enrich and innovate green finance and ESG (environmental, social, and governance) investment products, and gradually improve environmental information disclosure and enterprises’ capacity for managing environmental and social risks in the region.

“As a slew of factors, including macroeconomic trends, the international situation and COVID-19, affect the global capital market this year, China’s continued high-quality opening-up of the financial sector will boost the confidence of overseas investors,” she said.