On February 20, China’s Ministry of Finance officially released the first Green Sovereign Bond Framework of the People’s Republic of China (hereinafter referred to as the “Framework”), laying the foundation for China to issue green sovereign bonds in the global financial market. This move underscores China’s commitment to sustainable green development, enriches the variety of high-quality green bonds in the international financial market, encourages more Chinese issuers to participate in green bond issuance, and further attracts diverse investors to the green finance market. The introduction of the Framework marks a milestone in China’s green finance development and injects new vitality into the global green finance market.

Funds Under the Framework to Support Building a Beautiful China

Green sovereign bonds issued under the Framework will adhere to four core elements: use of proceeds, project evaluation and selection, management of proceeds, and information disclosure. All funds raised will be allocated to eligible green expenditures within the central government budget. The Framework identifies six eligible green project categories: clean transportation, sustainable water and wastewater management, environmentally sustainable management and restoration of biological and land resources, marine ecological protection and restoration, pollution prevention and control, and resource recycling.

To ensure funds are genuinely used for green projects, the Framework establishes strict regulations on project evaluation and selection, fund management, and information disclosure:

- Project Evaluation and Selection: The Framework requires rigorous assessment of proposed investment projects to ensure they meet green standards, with priority given to projects demonstrating significant environmental benefits.

- Fund Management: The Framework emphasizes the earmarked and transparent management of proceeds, mandating the establishment of dedicated accounts, regular disclosure of fund usage, and third-party evaluation and certification.

- Information Disclosure: The Framework requires regular disclosure of relevant information, including fund usage, environmental impact assessment reports, and third-party evaluation reports, ensuring transparency and accountability.

Data shows that the central government has prioritized green and low-carbon initiatives in its fiscal expenditures, significantly increasing investments. Over the past five years, annual central government spending on ecological protection and green development has ranged from 500 to 650 billion yuan. Cumulative funding for the Blue Skies, Clear Waters, and Clean Lands initiatives has reached nearly 3 trillion yuan, with an average annual growth rate of 7%. This includes supporting clean heating reforms in 88 northern cities, promoting energy consumption transformation, protecting key river basins like the Yangtze and Yellow Rivers, exploring soil pollution remediation, and funding 27 integrated ecological protection and restoration projects for mountains, rivers, forests, farmlands, lakes, grasslands, and deserts, as well as 49 historical abandoned mine restoration projects. Additionally, marine ecological protection and restoration projects have received funding for 83 initiatives, contributing to continuous improvements in China’s ecological environment.

The Framework Aligns with Both Chinese and International Standards

The Framework innovatively achieves “dual-standard certification,” rigorously aligning with the China Green Bond Principles (2022 Edition) while fully integrating the Green Bond Principles (2021 Edition, including Appendix 1 as of June 2022) by the International Capital Market Association (ICMA). Two internationally recognized institutions, Lianhe Green Development Company Limited and DNV Business Assurance Limited, independently evaluated the Framework and issued second-party opinions. Both institutions confirmed that the Framework complies with the core elements of ICMA’s Green Bond Principles (GBP).

The introduction of China’s first green sovereign bond framework is a significant event for the global green finance market. It not only provides new momentum for China’s green finance development but also offers a Chinese solution for the global green finance market.

- Promoting Green Finance Development: The Framework establishes unified standards for China’s green bond market, attracting more investors and driving green finance growth.

- Supporting the “Dual Carbon” Goals: Proceeds from green sovereign bonds will fund low-carbon projects, aiding China’s efforts to achieve peak carbon emissions and carbon neutrality.

- Enhancing International Influence: By issuing green sovereign bonds, China demonstrates its commitment to addressing climate change and advancing green development, bolstering its influence in the global green finance arena.

The launch of China’s first green sovereign bond framework signifies a new phase in the country’s green finance development. Moving forward, China will continue to refine its green finance system, promote the healthy growth of the green bond market, and provide robust support for achieving its green and low-carbon development goals, setting an example for global environmental governance.