China revises its green taxonomy to foster financial investments in energy transformation

In a significant move towards sustainable development, the Chinese government has updated its green taxonomy. The new taxonomy, endorsed by the People's Bank of China, the National Financial Regulatory Administration, and the China Securities Regulatory Commission, comes into effect in October 2022.

The updated green taxonomy defines which economic activities and investments qualify as green or environmentally sustainable across various industries. It replaces two separate green lists for bond and loan markets, aiming to provide a more streamlined and efficient approach.

The new taxonomy expands on green economic activities, such as those related to climate resilience and methane abatement. It also includes passenger rail for the first time, and the scope of green finance has been expanded to include green trade and consumption.

The consolidation of the green taxonomy is expected to reduce reporting costs for financial institutions and provide more support for decarbonisation in China. The new catalog for green financing in China was issued by the People's Bank of China (PBOC) and the National Development and Reform Commission (NDRC).

Incentives are still needed to ensure the development of green finance in China. While the updated standards are a huge milestone, they alone may not be enough to drive widespread adoption of greener practices. The new taxonomy places greater emphasis on green and low-carbon industries, which may encourage industries to adopt greener practices.

Green consumption focuses on shifting the focus from production to demand. According to economist Xie, this approach could potentially reduce consumer costs and drive innovation. However, more clarity is needed for market participants to avoid double counting. There is some overlap with other transition finance standards as China continues to pilot its standards.

The new taxonomy does not cover Chinese equities. This means that while the financial sector is being encouraged to adopt greener practices, the same may not be immediately applicable to the stock market.

The inclusion of green consumer loans and mortgages could potentially benefit consumers, as they may be able to access more affordable financing for environmentally friendly products and services. This could help drive the growth of the green economy in China.

As the world grapples with climate change, the updated green taxonomy is a significant step towards a more sustainable future for China. The consolidation of the taxonomy is expected to provide a clearer path for financial institutions to support decarbonisation efforts, and the expansion of the scope of green finance could help drive innovation and growth in the green economy. This page was last updated on August 5, 2025.

China revises its green taxonomy to foster financial investments in energy transformation