Guangdong to Further Promote Carbon Market Construction

On July 13, China’s Guangdong Provincial Government released a new plan for the development of green finance to support the implementation of carbon peak-related actions. The program requires that by 2025, 40 green franchised institutions will be established in the province, and the growth rate of green loan balance will not be lower than the growth rate of various loan balances. By 2030, the proportion of green credit to all loan balances will reach about 10%, and the carbon financial market is planned to operate effectively.

This framework supports Guangzhou Futures Exchange to accelerate the listing of futures that serve green development, such as electricity, silicon and lithium, and develop carbon financial derivatives to serve the construction of the national carbon futures market.

The authorities also encourage financial institutions to engage in carbon market transactions on the premise of complying with regulatory requirements, providing services such as fund depository, clearing, settlement, carbon asset management and agency account opening for carbon transactions. Financial institutions are also promoted to explore the cross-border facilitation mechanism of carbon trading, launch foreign exchange pilot projects of carbon emissions trading, actively use the cross-border RMB payment system, and introduce investors from Hong Kong, Macao and overseas.

In terms of varieties of carbon financial instruments, the program proposes to explore financial products such as carbon asset mortgage financing, carbon asset custody, carbon repurchase, carbon fund, carbon leasing, and structured deposits of carbon emission rights income. It could therefore enhance the liquidity of the carbon market. Also, the program supports financial institutions to develop new mortgage financing models based on environmental rights such as carbon emission rights, emission rights, energy use rights and green project charging rights.

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In terms of enterprise carbon emissions, the program proposes to build a green financial innovation and development platform based on the Shenzhen Stock Exchange, instruct listed companies to actively disclose their carbon emission information, and launch product innovations such as green securities index and “environmental, social and corporate governance (ESG)” evaluation systems.

In terms of regulation and supervision, the program proposes to strengthen the follow-up use and management of funds for green financial products. It guides financial institutions to strengthen the follow-up management of green financial product funds, and supervises the use of product funds according to the agreed purposes. If illegal misappropriation of funds is found, necessary internal risk control measures shall be taken promptly.