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The $35 Trillion Sustainable Finance Market Gets Greater Clarity

Photovoltaic panels at the Salsipuedes solar plant in Villa de Arista, San Luis Potosi state, Mexico, on Friday, Oct. 8, 2021. President Andres Manuel Lopez Obrador's plan to change the constitution to give control of the electricity market to state utility CFE would destroy Mexico's clean energy advances, according to a joint statement from the country's wind and solar associations. Photographer: Mauricio Palos/Bloomberg

(Bloomberg) —

A push to bring greater standardization to the global sustainable finance market worth more than $35 trillion by two of the world’s biggest economies is fueling expectations for further growth in the rapidly expanding sector.

China and the European Union released a report last week on how they classify sustainable financing amid ongoing efforts to simplify a jumble of standards and practices globally. The Common Ground Taxonomy was written by a working group co-chaired by the European Commission and China’s central bank, and details taxonomy efforts by 26 countries or groups of nations. 

“One of the main problems facing global green finance is that there are too many standards,” said Xie Wenhong, head of China for the Climate Bonds Initiative. Two major economies reaching consensus on green-finance standards provides “a leading role for the rest of the world to follow,” he said.

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Sustainable finance, which among other things can help to mitigate against climate change, has long faced calls for common standards. The issue has been particularly acute for certain Chinese green securities, which some investors have considered not to meet some widely accepted criteria. 

“I would expect to see more willingness and confidence to invest in China’s onshore and offshore green bonds by European investors” as a result of the effort, said Chaoni Huang, head of sustainable capital markets, global markets APAC, at BNP Paribas.

–With assistance from Olivia Tam.

© 2021 Bloomberg L.P.

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