Executive Summary: Fintech Report 2022

Fintech Facilitates the Sustainable Development of Green Finance in China

Financial technologies (or fintech) have a crucial role to play in supporting the development of green finance in China. These technologies, from AI and cloud computing to big data and mobile payments, are helping drive capital towards climate and other environmentally-friendly goals. They can help financial institutions efficiently collect and analyze environmental data. They can help investors provide more accurate information on green products. They can mitigate climate-related financial risks, support biodiversity conservation, and make agricultural development more sustainable. Their evolving uses, and the policy landscape in which they are developing, have wide implications for the future of green finance. 

The Green Finance Center of the Paulson Institute and the Institute of Finance and Sustainability (IFS) have researched the application and case studies of fintech-enabled green finance in China since 2020. The joint 2022 report, Fintech Facilitates the Sustainable Development of Green Finance in China: Cases and Outlook (2022), examines the latest trends and practices and looks into market dynamics, technology applications, and frontier products, and highlights three new case studies.

The report is divided into four sections. First, it reviews the latest domestic and global policy developments in green fintech. Second, it provides an update on four case studies from 2020 and 2021. Third, it presents three new case studies demonstrating how fintech enables China’s green development. Finally, it summarizes the key challenges ahead and provides recommendations for policymakers and leaders in the private sector. 

Review of Policies, Markets, and Opportunities

In January 2022, the People’s Bank of China (PBOC) issued the Fintech Development Plan (2022-25). The plan lays out the ambition to facilitate deep integration of fintech and green finance, innovate and develop digital green finance, use technology to promote the development of green and low-carbon financial products and services, and focus on improving the coverage and accuracy of financial services to green industries. 

In February 2022, the PBOC, China Banking and Insurance Regulatory Commission (CBIRC), the State Administration for Market Regulation (SAMR), and the China Securities Regulatory Commission (CSRC) jointly issued the 14th Five-Year Plan for Financial Standardization. This plan seeks to promote the digitization and standardization of financial services; provide more standards around artificial intelligence (AI), blockchain, big data, cloud computing, mobile finance, and other fields; improve fintech risk prevention; study and develop standards for transition finance; and proposes to "create an ESG evaluation standard system" that helps the economy and society achieve green development and low-carbon transition.

According to research by IFS, there were 84 technology companies active in China's green fintech sector in 2021, an increase of 25 companies compared with the previous year. 

The report selected 61 green fintech companies that focused their business on green finance for in-depth research and analysis. The analysis divided the companies by business type and model and found Chinese technology companies serving the green finance sector fall into four main categories:

  1. Big data service providers for environmental information,
  2. Fintech companies whose main business is serving green finance,
  3. Technology service subsidiaries that are part of financial institutions, and
  4. Internet technology companies.

Compared with 2020, the market in 2021 shifted from promoting single product innovation to providing system-wide solutions and from making credit loans to helping with green industry investment.

Other notable observations from the analysis include:

  • For green finance products, fintech tools are mainly used in the fields of green credit, green bond, green insurance, green fund, green trust, green leasing, environmental rights trading, and carbon finance.
  • For technology application, big data, AI, and cloud computing are still the three pillars driving green finance development.
  • For services and application scenarios, when serving green finance, relevant technology companies mainly provide services such as data supply, system development, software as a service (SaaS) platform service, as well as system solutions and ecosystem services for specific business scenarios.
  • Regarding users, relevant technology companies in the field of green finance currently mainly serve financial institutions, companies, and government departments. The development of financial supervision and application scenarios for individual users is still relatively limited.
  • As for the development of fintech-enabled green finance around the country, the clustering effect is obvious in Beijing and Shanghai. Shenzhen and Hangzhou have also shown potential.

The figure below shows the market landscape in terms of technical application, green finance products, application scenario, users, and regional development, based on the research and analysis of 61 Chinese fintech companies whose main business is serving green finance.[i]

Looking ahead, the development of sustainable finance will include efforts around forming consensus for transition finance, building the finance case to support biodiversity conservation, and integrating green finance and inclusive finance. The G20 Sustainable Finance Roadmap released by the G20 Sustainable Finance Working Group (SFWG) in 2021 and the Network for Greening the Financial System (NGFS) have both emphasized these trends.[ii] [iii] 

Chinese regulators have already started to provide direction and guidance along these lines, which may provide more positive momentum for fintech to support green finance development in the following areas:[iv] [v]

  • Biodiversity Conservation—Fintech helps environmental risk assessment for biodiversity conservation.
  • Carbon Accounting and Carbon Asset Management—Fintech provides a systematic solution for carbon finance.
  • Transition Finance—Fintech provides whole-process quantification and certification services for corporate "carbon reduction" transition.
  • ESG Evaluation and Investment—Fintech includes small and micro companies in the scope of green finance support and promotes the development of green and inclusive finance.
  • Green Agriculture—Digital technology empowers the identification and financial support of green agriculture activities.

2020 and 2021 Case Study Follow-up

The research team selected two cases each from the 2020 and 2021 Fintech Facilitates the Sustainable Development of Green Finance in China: Cases and Outlook to update. In these cases, fintech was applied in a financial institution's ESG evaluation system, a company's carbon emission management, integrated into a green finance service platform, and a bank's green loan system. Some cases have been able to enhance the functionality of their systems to improve their efficiency and effectiveness, and some of the successful experiences have been replicated in similar institutions and regions. They show that fintech has played an active role in helping financial institutions make ESG investment decisions, improve data accuracy and integrity, increase work efficiency, reduce the chance of manual intervention and misjudgment, and control financial risks.

Case 1: Harvest Fund’s ESG Rating System (Case from the 2021 Report)

Harvest Fund is one of China’s largest mutual fund companies and one of the earliest fund management companies established in the country. In 2021, Harvest Fund’s ESG rating system began to include the Hong Kong stock market based on continuous upgrading of its rating methodology, providing high-quality basic data facilities for ESG investment strategies and products, promoting the implementation of ESG from concept to practice, and extending the scope of sustainable investments. On September 3, 2021, Harvest and WIND jointly released three ESG-related indexes based on Harvest ESG scoring system, adding to the seven ESG and carbon neutrality theme indexes launched together earlier in the year. The series has performed well since its release, demonstrating the excess return capability of ESG factors in the A-share market.

One Exchange Square, home to the Hong Kong Stock Exchange

Case 2: China Huadian Group’s Carbon Emissions Information Management System (Case from the 2021 Report) 

Huadian Corporation is the third-largest power generation company in the world and one of the top five state-owned power generation companies in China. Huadian launched its Carbon Emissions Management System in August 2019 in preparation for the launch of China’s national carbon market. Since the system went online in August 2019, it has achieved full coverage of carbon emission data of all directly affiliated business units and more than 130 thermal power generation companies under China Huadian, enhanced the company’s digital management capabilities, and realized effective integration of carbon emissions and information management for business units at all levels. In 2021, the system was upgraded and improved in the management functions of carbon emission data and carbon credit compliance to aid business units at all levels in managing their carbon emissions. 

Case 3: Huzhou City Green Finance One-Stop Service Platform (Case from the 2020 Report) 

Piloted by the Huzhou local government, the Green Finance One Stop Service Platform is a tech platform that provides a number of important financial services to support the green development of small and medium enterprises. Since it was launched at the end of 2018, it has provided one-stop access to corporate financing, improved the quality and speed of banking services, and put in place green finance policies in a precise and effective way. By the end of 2021, the platform had registered 40,759 companies, up by 40.21 percent from 2020 and 156.98 percent from 2019. It helped 29,906 green micro and small companies obtain credit loans of 292.962 billion RMB (about USD 44 billion) from banks, an increase of 38.19 percent from 2020 and 102.76 percent from 2019. One hundred eighteen projects were introduced to institutional investors, raising 10.576 billion RMB (about USD 1.6 billion), up by 22.35 percent from 2020 and 74.81 percent from 2019. In 2021, the platform added new functions, such as ESG evaluation. It launched the innovative Green Loan Connect+ loan assistance model, which has been successfully replicated and promoted in other regions in China.

Case 4: Bank of Huzhou Green Credit Management System (Case from the 2020 Report) 

Bank of Huzhou

The Green Credit Management System is a cloud platform that uses fintech to identify, evaluate, and classify green projects to provide more accurate information for managing the bank’s green finance business. From the system's inception in March 2019 to the end of 2021, more than 42,000 transactions had been identified as green and labeled in the whole process, and the number of green credit loans identified by the system had gone up by 13.49 percent from 2020 and 47.18 percent from 2019. In addition, 700 project loans have been measured for environmental benefits. The system helped the Bank of Huzhou solve problems such as insufficient capacity, inaccurate identification and lax verification of green credit loans and refine the whole-process online management of green business. In 2021, the system was further improved in terms of green identification efficiency and cost reduction, and ESG evaluation. It was also replicated and promoted in financial institutions outside the Huzhou Green Finance Reform and Innovation Pilot Zone.  

2022 Case Studies 

The 2022 report includes three new case studies. These cases highlight how fintech is being used to support biodiversity conservation, ESG evaluation for micro and small enterprises, and green agricultural development in China.

Case 1: Fintech to Support Biodiversity Conservation 

Environmental Risk Screening Tool (ERST) for China’s Overseas Investment Projects

In early 2018, the Paulson Institute and the Foreign Environmental Cooperation Center (FECO) of the Ministry of Ecology and Environment (MEE) jointly launched the development of the Environmental Risk Screening Tool. The ERST tool aims to provide science-based and efficient decision support tools for key decision-makers in the Chinese government, as well as financial institutions and investors, to improve the environmental risk management of overseas investment projects and thus reduce or avoid political, diplomatic, and financial risks caused by poor environmental risk management.

The ERST tool is based on Geographic Information System (GIS) and spatial analysis. After the user sets the boundaries of the proposed project's construction area and peripheral potential impact area with coordinates or manual drawings, the system will automatically perform biodiversity risk analysis and generate reports with reference to the prevailing environmental policies and standards of multilateral financial institutions. 

ERST maintains a high level of consistency with mainstream international biodiversity impact assessment tools in key datasets, ensuring the assessment results are science-based and authoritative. The bilingual tool in Chinese and English has a simple, intuitive, and easy-to-use interface so operators can quickly pick up the system after a short training. ERST can run independently in the user's intranet environment, thus greatly enhancing the data security of the projects under evaluation. In addition, ERST is designed and structured to allow future expansion of the system's functional modules and datasets to meet users' specific requirements. The commitment to pilot and test this tool by financial institutions and investors will help to fine-tune its functionality and improve its accuracy and efficiency.

Case 2: Fintech to Support Inclusive Development of Micro and Small Enterprises

Huzhou City’s ESG Evaluation System for Financing Enterprises

In 2021, the Huzhou municipal government launched the ESG Evaluation System 4.0 for green companies seeking funding. The launch was supported by IFS in Beijing and led by PBOC Huzhou City Center Sub-branch and the Huzhou Supervision and Administration Bureau of the CBIRC. Since Huzhou’s ESG evaluation system went live, 17,184 companies have been evaluated. The ESG evaluation system has been tested with a large number of data samples and can effectively identify green companies and reduce the non-performing loan (NPL) ratio of green loans. The updated system can be more easily replicated and applied in other regions considering integrating green finance and inclusive finance to support SMEs' green development.

The system evaluates and scores companies in Huzhou City in the three ESG dimensions. It further adjusts the weighting for micro and small companies based on their unique features and system data, making it more applicable to micro and small companies' lending. The environmental impact dimension (E) highlights carbon neutrality, in which evaluation criteria include the dependence of a company’s main business on natural resources and their environmental credit rating, providing support for financial institutions to conduct subsequent green credit business. The social responsibility dimension (S) stresses stable employment, which provides financial institutions with a more accurate credit picture of the SME before granting credit loans. The corporate governance dimension (G) focuses on company sustainability measured by a comprehensive metric from Zhejiang Province named “Performance Per Mu Hero,” introduced to measure company sustainability development level.[vi]

Case 3: Digital Agriculture System Supports Green Agriculture Development

Chengdu Digital Agriculture Platform

The digital agriculture platform constructed by Sichuan Rundi Agriculture Company is an interconnected and shared digital information service system for agriculture designed for farmers. The platform has realized deep integration and adoption of digital technology in traditional agriculture, helping the agricultural industry chain gain economic and environmental benefits, promoting the development of low-carbon and green agriculture, and showing how financial services can better revitalize rural areas. It uses digital technology to measure arable land accurately and identify crops, provide environment monitoring, disaster warning, and other functions, and form a modern agriculture industry chain ecosystem that significantly reduces GHG emissions. 

With the platform, the carbon emission intensity of wheat planting dropped by roughly 13 percent to 21 percent compared with the traditional model, and the carbon emission intensity of rice planting fell by about five percent. Moreover, the platform reduced farmers' transaction costs, improved the granularity of government management, helped financial institutions with accurate and effective decision-making and management, and achieved good agriculture results. Linking with Chengdu’s Agriculture Loan Connect, the platform was able to involve more green agriculture farmers and companies in the modern rural financial service system, improve the efficiency of inclusive finance serving green agriculture, and create a new inclusive finance environment. Also, the loan interest rate has been reduced by more than 70 percent compared with previous capital lending and agricultural credit. 

Agricultural fields in Chengdu, Sichuan

Key Challenges and Recommendations

Regulators and relevant ministries and commissions: The existing green finance policy framework of regulators and relevant ministries and commissions lacks specific guidelines for fintech to support the development of green finance, and there is no sharing mechanism for environmental and climate data between industries and the financial sector.

  • Recommendation: Fintech's support for green finance could be incorporated into future versions of guidelines on green finance and transition finance. For example, further adjustments to the PBOC-issued document Green Finance Evaluation Scheme for the Banking Industry and Financial Institutions that enhance the guidance and evaluation of banks' use of fintech to promote green finance, like establishing incentive mechanisms, will also help. These entities should also take on the responsibility of driving more sharing of environmental and climate data between industries and the financial sector and encourage financial institutions, fintech companies, research institutions, and other entities to increase their capacity and enter into partnerships to support green finance with fintech.

Local governments: Environmental data is localized among various departments at the local government level, making it difficult to share and verify, creating information silos. In addition, the corporate ESG sustainability evaluation made by local governments still heavily relies on manual scoring, with little fintech adoption.

  • Recommendation: Local governments should establish platforms for sharing environmental data of companies leveraging fintech, such as utilizing "Internet of Things (IoT) + Blockchain" for closed-loop data collection, uploading, and sharing without any human interference. In addition, they should improve supporting policies and promote the building of a quantitative evaluation system for corporate sustainability.

Financial Institutions: Financial institutions do not pay enough attention or properly plan ways to encourage fintech to support green finance. There is generally a lack of communication and collaboration between their green finance business and fintech departments. Moreover, generalists who are fintech-savvy and also understand green finance are rare, which signifies that effective synergy and integration between green finance and fintech within financial institutions is not realized.

  • Recommendation: Financial institutions should gain more understanding of the crucial role fintech plays in supporting the development of green finance, establish a mechanism for their green finance business department and fintech department to collaborate through joint working groups, and expand the use of fintech for green finance product innovation.

Technology companies: Technology companies are still at the nascent stage of developing and applying critical technologies for green finance. Thus, it is difficult to meet the need for green finance development. They do not have a deep understanding of the critical needs, latest application areas, and future development direction of green finance, nor have they taken a deep dive into the application scenarios of green finance. Therefore, technology firms cannot fully support the explosion of green finance innovation.

  • Recommendation: Technology companies should concentrate on key technological innovations, such as blockchain, IoT, and remote sensing, that will help fintech facilitate green finance, expand fintech's main use scenarios in green finance, and provide solutions for areas like carbon accounting, transition finance, and green and inclusive finance based on their technology and data.

2022 Fintech Report


[i] IFS annual fintech company survey

[iii] Central Banking and Supervision in the Biosphere: An Agenda for Action on Biodiversity Loss, Financial Risk and System Stability report.  https://www.inspiregreenfinance.org/programmes/biodiversity-and-financial-stability 

[iv] Opinions on Establishing a Sound Mechanism for Realizing the Value of Ecosystem Products:  http://www.gov.cn/zhengce/2021-04/26/content_5602763.htm 

[v] Implementation Opinions on Promoting the High-Quality Development of Inclusive Finance

[vi] “Performance Per Mu Hero” is an important initiative of Zhejiang Province to drive companies to account for energy consumption and environmental impact while generating economic benefits in order to promote high-quality economic development.


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