China’s green finance market seen quadrupling to US$10.4 trillion by 2031, but lack of ESG data holding back funds, products, UBS says
- While China’s green finance market has reached 16 trillion yuan, assets under management in ESG funds only total around 500 to 600 billion yuan
- Since the first green bond was issued in 2016, the cumulative volume of sustainable bonds in China had reached 1.73 trillion yuan by the end of 2021
China’s sustainable finance market could more than quadruple to 70 trillion yuan (US$10.4 trillion) by 2031, according to Swiss investment bank UBS.
Close to 15 trillion yuan of China’s sustainable finance market consists of green loans, mainly from commercial banks, according to UBS. But assets under management of ESG funds has only reached around 500 to 600 billion yuan, representing a small portion of the market.
“If there are better information disclosures [by firms], it would make it easier for investors to include some Chinese companies in some of their indexes and products, which will play an important role in promoting the development of ESG investment,” he said at the UBS Greater China Conference 2023 on Thursday.
ESG disclosure requirements from both regulators or standard-setters will have a positive effect on promoting the development and growth of ESG funds and investments, he added.
Since the first green bond was issued in 2016, the cumulative volume of green bonds in China had reached 1.73 trillion yuan by the end of 2021, with an average annual growth rate of nearly 25 per cent over five years, according to data published by the China Central Depository and Clearing and the International Capital Market Association on Tuesday.
Major Sustainability Reporting Frameworks and Standards Setters
Acronym |
Full Name | Year of Establishment |
GRI | Global Reporting Initiative | 2000 |
IFRS Foundation | International Financial Reporting Standards Foundation | 2001 |
PRI | Principles for Responsible Investment | 2006 |
CDSB | Climate Disclosure Standards Board | 2007 |
IIRC | International Integrated Reporting Council | 2010 |
SASB | Sustainability Accounting Standards Board | 2011 |
TCFD | Task Force on Climate-Related Financial Disclosures | 2015 |
NGFS | Network for Greening the Financial System | 2017 |
SFDR | Sustainable Finance Disclosure Regulation | 2019 |
ISSB | International Sustainability Standards Board | 2021 |
The IFRS Foundation signed a memorandum of understanding with China’s ministry of finance late last year to open an ISSB office in Beijing in mid-2023.
“We hope that it will serve as the beginning of a new journey that will witness closer cooperation between the two sides towards development and promotion of ISSB’s high-quality international sustainability disclosure standards,” Zhu Zhongming, China’s vice-minister of finance, said in a statement on December 29.
The Beijing office is expected to play a vital role in the development of the new sustainability disclosure standards.
“China is the world’s second largest economy and plays a vital role in supply chains for companies around the world – making it an important jurisdiction as the ISSB develops its global baseline of sustainability disclosures for the capital markets,” ISSB chair Emmanuel Faber said in a statement.