Building on international experience in green bonds, the report recommends a government-endorsed system or third-party assurance system for the green claims of corporate bond issuers, providing a price differential for green compared to "brown" loans to create more deal flow for green bonds, and offering tax credits for green bonds.

Innovative recommendations covering the role of central banks include the establishment of green refinancing facilities, consideration of green steering of asset purchases in the context of quantitative easing, including environment-related risks in the models for "stress testing" in relation to financial stability and more broadly eliminating sector biases in current monetary policy that are misaligned with the objectives for a green economy.

Implementing even a fraction of these recommendations would make China the world's most ambitious experiment in greening a major financial system. Centrally, China's ambitious thinking sees green finance as core, not additional to the financial market reform agenda. From this perspective, a lack of green financing delivers poor allocation of capital, mispriced risks and weaker long-term economic growth, creating stresses that ultimately lead to financial market instability and underperformance.

Greening the financial system, on the other hand, would improve its efficiency, effectiveness and resilience, making it fit for purpose in serving the needs of China's and international economic development in the 21st century.

The author is a co-Director of the UNEP Inquiry into Design Options for a Sustainable Financial System, the international project lead in the DRCFI-led study into China's green finance, and the international co-Convener of the Green Finance Task Force initiated by the People's Bank of China.

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