Greenwashing will not be tolerated, China warns firms
The People’s Bank of China said it will guard against “moral hazards” such as greenwashing and sustainable project fraud as it expands its use of green monetary policy to drive the nation’s energy transition.
In a rare interview in English with a state broadcaster, governor Yi Gang warned against the “greenwashing, low-cost fund arbitrage, and green project fraud” that has been on the rise alongside the influx of sustainable capital in recent years.
“For fair and efficient implementation of green monetary policy tools, we should guard against different kinds of moral hazards. Therefore, information disclosure and strict supervision are needed when we design and implement” them, Yi said.
A transcript of his interview with China Global Television Network was released on Monday by the central bank in English and Mandarin, a sign that it was targeted towards an international audience.
As the world’s worst polluter, China has quickly pushed a chart-topping amount of private money to meet its green targets, which include peak emissions by 2030 and carbon neutrality by 2060. In just a few years, it has become one of the biggest issuers of green bonds, green loans and other financial products designed to support those policy goals.
The central bank has wielded its green monetary tools to contribute to that push. Since November, it has lent about 210-billion yuan ($31.4bn) to banks at cheaper rates to help them provide more loans to firms working towards China’s carbonreduction goals.
Chinese borrowers have sold about $56.4bn in local and offshore ESG (environmental, social & governance) debt in 2022, making it one of the world’s fastest-growing green bond markets. New green bonds in China almost doubled in the first quarter, even as the rest of the world posted a 32% decline.
Still, the risks of poor oversight and access to cheap credit are fresh in regulators’ minds, with the debt crisis in China’s real estate sector still playing out. Allowing riskier borrowers unfettered access to cheaper green debt has already caused defaults. Late in 2021, Modern Land China failed to repay a green dollar bond and Kaisa skipped payment on a sustainability bond.
The central bank will continue promoting disclosure and “strict supervision,” Yi said. In 2021, it released guidelines on environmental reporting for financial institutions, including on green loan issuance. It has been piloting the programme in the Greater Bay Area along with Guizhou and Chongqing in southwestern China. It is to be expanded nationwide, Yi said.
“This year, our priority is to develop the framework for transition finance, to guide social capital to support low-carbon transition of high-emission sectors,” he said.