China is a major market for green and sustainable finance. According to official data, China’s green bond market totaled 125 billion USD (852 billion RMB) as of 2020. In that same year, the value of green loans reached 1.8 trillion USD (12.1 billion RMB).
However, the country is still facing significant financial gap in achieving the SDGs. For instance, according to the calculation from the Chinese central bank 328–582 billion USD (2.2-2.9 trillion RMB) is needed annually for China to achieve its goal of peaking carbon emissions before 2030 and reaching carbon neutrality before 2060.
The fundamental problem is not a lack of resources, but how they are prioritized. For example, reallocating just 1.1 percent of global financial assets could close the SDG financing gap in developing countries. What is needed are structural changes to repurpose our financial systems.
Since 2016, China has established a comprehensive policy framework for greening its financial system. Its efforts in redirecting financial resources for environmental objectives are essential to meet the global sustainable development goals. To this end, UNDP strives to work with partners across the public and private sectors to enhance SDG-alignments in China’s financial system by increasing data availability, boosting transparency, harmonising standards, and facilitating international experience sharing.
To fill in the data and information gap, which is crucial for investors to make sustainable finance decisions, UNDP has developed the SDG Investors Maps - a market intelligence toolkit to help public and private investors (funds, financiers, corporations) identify investment opportunities and business models that align with the SDGs. So far, the platform has integrated data from 15 countries, including China, where we have mapped the Health and Agriculture sectors using AI and big data. Two further SDG Investor Maps for the renewable energy sector and the circular economy, both of which are critical for China’s 2030/2060 carbon peaking and carbon neutrality goals, are forthcoming in 2022.
The SDG Impact Standards is another UNDP flagship initiative, providing investors and businesses with the guidance to strengthen their contribution to the SDGs. These standards – for Private Equity, Bonds and Enterprises – establish a common framework for measuring, reporting on, and authenticating the SDG impact of investments. In China, to complement the Green Bond Endorsed Project Catalogue issued by Chinese regulators, UNDP launched the SDG Finance Taxonomy in 2020 - offering a classification system with impact indicators and screening criteria for investments that can contribute to the SDGs.
In March 2021, we partnered with the New Development Bank (NDB) on issuing a 5 billion RMB (747 million USD) SDG Bond for China to finance a sustainable COVID-19 recovery. This marks the first time globally that a multilateral development bank has used UNDP’s SDG Finance Taxonomy and Impact Standards.
Utilizing the knowledge generated from the SDG Finance Taxonomy and the NDB pilot, in November 2021, UNDP provided advisory support to China’s National Association of Financial Market Institutional Investors (NAFMI) for its debt instrument guidance (for Social Responsibility Bond and Sustainable Development Bond). The guidance incorporates several key sustainable development aspects and principles including Do No Significant Harm (DNSH), serving vulnerable groups, as well as considerations of using SDG targets as impact indicators.
In the public finance sector, UNDP focuses on embedding the SDGs within the allocation and expenditure of national budgets. Through our SDG budgeting initiative, we have supported 55 countries to map, evaluate, monitor and report SDG-related government expenditures, as well as to improve accountability and impact measurements for better SDG alignment in the design of national budgeting systems. In China, we cooperated with the China Academy of Fiscal Science (CAoFS) in 2017 and 2018 to review China’s climate public expenditure and institutional framework at central government level and provincial level with Hebei Province as a case study. Building on this knowledge, we are currently working with the International Institute of Green Finance at the Central University of Finance and Economics (CUFE) to explore pathways of greening public expenditure through the budgeting process.
UNDP’s global Biodiversity Finance Initiative (BIOFIN) has also expanded to China as part of international efforts to multiply resources for conservation and improve their effectiveness. Working with over 40 countries, BIOFIN aims to show how biodiversity finance can work both for people and planet. Its launch in China combines biodiversity protection efforts in Shandong Province with the financial innovations in Shanghai, furthering China’s contributions to green finance.
Moving forward, UNDP will continue to work closely with public and private partners in China on strengthening financing for a low carbon future for all. We are focusing on:
Unlocking private finance for the SDGs
SDG-aligned fiscal and financial instruments
Impact Measurement and SDG finance reporting