China Green Finance Task Force Report: Discounted Green Loans

Country Paper

Authors: Green Finance Task Force   

Published By: UNEP Inquiry    Research Bureau of the People's Bank of China   

Date: Apr 2015

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China Green Finance Task Force Report: Discounted Green Loans

This paper argues that discounted interest rates for green loans can be  an effective means to use limited public subsidy to stimulate private investments equalling several times the amount of seed fund provided by the government. It recommends that China:

  • Expland the use of discounted greend loans for energy conservation and environmental protection projects.
  • Sreamline and optimize the decision making process for issuing green loans with clear responsibilities and channels of communication between government finance departments, banks, and environmental protection agencies.
  • Moderately increase the amount of discount and expand the scope of loans that have access to these discounted rates.
  • Set an appropriate discount period, removing the current three-year limit and basing the discounted rate on project need for green loans.
  • Simplify and accelerate the review and approval process for similar types of projects.
  • Provide risk compensation to banks making the loans and provide result-based monetary incentives to performing projects and banks
  • Establishing a third-party evaluation system
  • Enhancing the supervision and review of green loans
  • Draw upon the experience of German KfW Development Bank, implement a pilot program in which China’s finance department delegates the eco-finance divisions of designated banks (or future green banks) to manage the discounted rates on green loans.
[NB: This paper is one chapter of the broader report “Establishing China’s Green Financial System” developed by the China Green Finance Task Force, which was convened by the Research Bureau of the People’s Bank of China together with the UNEP Inquiry]
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