On 14 July, China’s financial regulators released the Green Finance Taxonomy, which unifies standards for green loans and green bonds.
The document defines the economic activities or investments that qualify as environmentally sustainable, or “green”, to help investors, banks and companies find projects that align with climate and environmental goals.
The taxonomy responds to concerns from financial institutions and regulators about inconsistent green-project classification. Until now, the separation between green loans and green bond standards has been widely viewed as a cause of confusion, operational burden and oversight challenges.
According to Liao Yuan, deputy secretary general of the Climate Investment and Financing Association, the unified taxonomy is expected to enhance clarity and improve efficiency across the sector.
Previously, organisations looking to provide or secure green loans, and local governments looking to make investments, mainly referred to the Green and Low-Carbon Transition Industry Catalogue (2024). While green-bond issuances relied on the Green Bond Endorsed Project Catalogue (2021). Those two catalogues were led by different government departments and differ in structure, terminology and classification methods. This made it difficult for investors, companies and regulators to compare data across instruments.
The new taxonomy also expands the scope of green finance to include “green trade” and “green consumption”, Liao Yuan found. Green trade refers to financing for producers of goods considered green, such as electric vehicles or high-efficiency solar panels. While green consumption covers the purchase by end users of such goods, which could include loans for energy-efficiency building upgrades. Liao believes their addition supports broader policy efforts to green the economy from both the production and consumer sides.
Transition finance is getting a place as well, to help heavy industries like steel and non-ferrous metals improve their technology and reduce emissions.
However, Dialogue Earth found that climate adaptation was underrepresented. Adaptation-related activities appear only sporadically and indirectly in the taxonomy, scattered across various sections under themes like ecological restoration, disaster control, or infrastructure upgrades. Key adaptation areas such as climate-smart agriculture, coastal protection and health are missing.
The taxonomy is designed to align with global standards while remaining practical for Chinese users, states Liao. It incorporates national industry codes familiar to banks and enterprises.
The taxonomy will take effect on 1 October 2025. Between now and then, projects approved under older standards will remain valid, according to the official notice. New applications may choose to follow either the old catalogues or the new taxonomy until the new one is fully in force.
Read Dialogue Earth’s previous report on China’s first green sovereign bonds.