By Jiang Mengnan

Copyright eco-business

The banking regulator did push for more green financing abroad, prompting some banks to withdraw from fossil-fuel lending in certain regions. But discordance persists between different parts of the same banks. This is not unusual globally. For instance, JP Morgan has large fossil-fuel and green-lending operations at the same time.

Ultimately, clients drive outcomes. The greener they become, the more green business banks will generate. Banks should support client transition. Some, like HSBC and Standard Chartered, already do so. For Chinese banks, it is less clear. As mentioned, a key indicator will be whether clients have credible transition plans. In China such plans are still emerging.

A cautionary case is Pakistan, where loans for coal plants are now going unpaid. Despite some coal projects, rolling blackouts continue. Households and businesses are increasingly buying solar panels, often Chinese-made and financed with Chinese loans, to secure their own supply but undermining coal-plant revenues. This shows Chinese interests abroad competing with each other.

Problems such as this are likely to ease as China’s 2021 moratorium on supporting new coal projects abroad takes effect.

In 2024, China, the EU and Singapore launched the Multi-Jurisdiction Common Ground Taxonomy. Where does it stand, and what challenges remain?

The Multi-Jurisdiction CGT, based on the 2020 EU-China CGT, was designed to help banks operate consistently across jurisdictions by offering a common framework for green finance criteria. CBI were involved in the European side. It will continue to evolve. Singapore has already joined, and we are talking with Brazil now.

The main obstacle is that the EU has not recognised the CGT for internal use. In China, if you meet CGT you meet the Green Finance Catalogue. In Europe, the taxonomy references many EU-specific laws, making it nearly impossible for outsiders to comply fully.

Another complication is that China’s taxonomy does not yet include provisions to “do no significant harm” (DNSH), meaning damage to other environmental objectives, like biodiversity or water protection. Such provisions are extensive in the EU version.

This mismatch makes equivalence politically and technically difficult. As a short-term measure, an interoperability tool is being developed, which we plan to launch at the COP30 later this year. This acts as a workaround until formal recognition of the CGT is resolved.

China is expected to soon submit its updated climate action plan. What do you expect from this new ‘nationally determined contribution’ (NDC) under the UN climate process?

I haven’t tracked the detailed language of the latest NDCs, but I anticipate it will be stronger and more ambitious.

Several signs point that way. President Xi’s recent speech signalled broader ambition by aiming to cover all greenhouse gas emissions across every economic sector. Including non-CO2 gases like methane marks a significant advancement for both China’s climate action and global efforts. Li Gao, formerly China’s lead climate negotiator, is now vice-minister for climate – a move to a senior position that sends a strong signal.

The withdrawal of US leadership from the climate-action process also allows China to step up. More importantly, China is making genuine progress. While the replacement of coal with gas is worrying, renewables and electrification have been outstanding.

China has built the world’s largest high-speed rail network, electric vehicles are expanding rapidly, and cities such as Shenzhen, Nanjing and Shanghai are highly energy efficient.

This progress provides the basis for more ambition. My current feeling is that China may already have peaked emissions this year, well before the targeted 2030, and will continue to reduce them. That would support a stronger NDC.

Looking ahead, one priority should be making the NDCs a manual for global and domestic investors seeking economy-wide transition-investment opportunities. We are developing means to support these efforts, including guidelines on creating and assessing national transition plans.

This article was originally published on Dialogue Earth under a Creative Commons licence.