Providing financing for green technology innovation: What lessons can China offer?

To successfully achieve the climate transition, we need to carry out a deep economic transformation, which requires the mobilization of a large amount of social capital. It is estimated that by 2030, at least $1 trillion of additional investment will be needed in energy infrastructure, and by 2050, at least $3-6 trillion of additional investment will be needed each year in various industries to significantly reduce greenhouse gas emissions and mitigate climate change to achieve the goal of net zero carbon emissions.

Decarbonization of the industrial chain is an opportunity to promote breakthroughs in emission reduction. In the process of decarbonization of the industrial chain from upstream to downstream, low-carbon technology is a key driving factor. At different stages of deployment, low-carbon technology requires financing tools that can meet different needs. For example, the advancement of initial research and development requires fiscal budget allocations and charitable funding, while commercially viable technologies and technologies close to commercialization require funds from different sources, and government loans, tax credits and venture capital are all very important.

As a major trading partner of more than 140 countries, China is one of the countries that best reflects the pace of green transformation of the global supply chain. In China, more than 800 large companies have set a goal of achieving carbon neutrality by 2060. Companies in the information and communication technology (ICT), textiles and manufacturing industries are particularly hard-working, hoping to achieve carbon neutrality before the country achieves its climate goals.

Whether in China or any other market, companies developing green technologies not only need to promote technological innovation, follow sustainable information disclosure reporting standards, set ambitious carbon reduction targets and strategies, but also understand investors' thinking. On the other hand, investors also need to understand the opportunities and risks associated with technology and its cash flow in order to truly promote the scale-up of green technology while avoiding "greenwashing".

Green procurement refers to the purchase of goods and services with minimal environmental impact, and aims to provide opportunities for those who own green technologies. Most of China's debt financing is expected to continue to be provided by banks. Currently, green loans (or "sustainability-linked loans") launched by banks as innovative financial products specifically for green transportation projects have injected new vitality into the development of green, low-carbon travel and sustainable transportation modes.

Looking ahead, China may expand the scale of the innovation chain and build a larger innovation ecosystem by establishing a common classification catalogue of sustainable finance, exploring new sources of public and social capital, and restructuring financing mechanisms to reduce funding costs.