(Yicai Global) Dec. 12 -- China's central bank has preliminarily confirmed the basic principles of transition finance to support firms to become greener, according to a deputy governor.

The People's Bank of China has facilitated research into benchmarks in the emerging financial approach in the areas of steel, coal power, building materials, and agriculture, and will publish them when the conditions are mature, Xuan Changneng said during the fourth Bund Summit on Dec. 10. The standards will justify carbon-intensive industries' reasonable funding needs in the process of low-emission transition, he added. 

However, in recent years, China's financial institutions have step by step explored methods of information disclosure regarding carbon footprint, and their capabilities of collecting and publishing environmental data have greatly enhanced, Xuan said. 

In the future, economic entities must draw up a carbon reduction roadmap to link economic interests with energy conservation and carbon emission cuts, the vice chief said. Financial institutes should focus on the development of a new emission calculation mechanism that is in line with China’s stage of economic development.

Since the green transition of high-carbon sectors is quite difficult to complete, and they are expected to face various risks in the process, financial institutions should be creative in providing innovative market tools such as equity financing, asset-backed securities, insurance, and guarantees to help companies that are well managed and have a clear and feasible transition strategy to mitigate any risks in the process, Xuan said.

Regulators should actively explore and timely introduce fiscal and financial support tools, and fully mobilize social capital to invest in projects with big environmental impact, the official said. The country needs to improve the comprehensive index system to assess green finance while widening the scope of application, he added.

Macroeconomic policies must pay more attention to employment goals and financial institutions should be guided to step up support in areas, industries, and groups that face larger pressures in their transition to effectively avoid financial risks and to maintain economic and social stability, the deputy governor concluded.

Editors: Tang Shihua, Emmi Laine, Xiao Yi