Provisions of Pudong New Area of Shanghai Municipality on Promoting the Green Finance Development

(June 22, 2022)

(Adopted at the 41st Session of the Standing Committee of the 15th Shanghai Municipal People's Congress on June 22, 2022)

Article 1

With a view to advancing the high-level green finance service, promoting the integrated development of green finance, inclusive finance and science and innovation finance, accelerating the construction of Pudong New Area as the core area of Shanghai international financial , and building the Shanghai international green financial hub, advancing the comprehensive green transformation of economic and social development and strengthening the ecological civilization construction, these Provisions are hereby formulated in accordance with the basic principles of related laws and administrative rules, and in the light of the actual circumstances of Pudong New Area.

Article 2

These Provisions apply to the activities of green finance and related guarantee and supervision within the administrative area of Pudong New Area.

Green finance mentioned in these Provisions refers to the financial services that are provided to facilitate the economic and social activities including but not limited to ecological environmental improvement, climate change combating, and efficient resource utilization and conservation.

Article 3

The Municipal People's Government shall strengthen the leadership of the green finance in Pudong New Area, deepen the collaboration with the departments of national financial management, development & reform, ecology and environment, and finance, promote the green financial reform and innovation, strengthen the risk management of green transformation, and coordinate and solve the fundamental problems in the work concerning green finance.

Pudong New Area People's Government shall establish a coordination mechanism for green finance work and improve the contact mechanism with the state financial management departments stationed in Shanghai, include the green and low-carbon transformation in the national economic and social development plans, further advance the green finance reform and innovation pilots such as climate investment and financing, and coordinate various support policies to enhance the green function levels of the key industries and promote the green economic and social development.

Article 4

The municipal financial regulatory department shall strengthen the communication and coordination with the state financial management departments stationed in Shanghai, and guide Pudong New Area in conducting the green financial reform and innovation, and in carrying out green financial supervision and administration in accordance with the law.

The municipal departments of development & reform, ecology and environment, finance, economy and informatization, science and technology, housing and urban-rural development, market regulation, and intellectual property, and other departments shall, in accordance with their respective functions and duties, improve their supporting policies to advance the development of green financial reform and innovation in Pudong New Area.

The municipal State-owned assets supervision and administration department shall strengthen the performance assessment management of green finance of the municipal State-owned financial institutions to promote the municipal State-owned financial institutions to implement the supervision and administration requirements for green finance activities of the national financial management departments.

The financial department of Pudong New Area shall be responsible for the development promotion and service guarantee of green finance within its administrative region. Pudong New Area departments of development & reform, ecology and environment, finance, economy and informatization, transportation, state-owned assets supervision and administration, market regulation, intellectual property, etc. shall jointly do a good job in the green financial reform and innovation within the scope of their respective functions and duties.

Article 5

The Municipal People's Government shall plan as a whole and establish a working mechanism for the evaluation requirements and criteria for the green enterprises and identification conditions, identification criteria for the green projects. The municipal departments of development & reform, economy and informatization, science and technology, ecology and environment, housing and urban-rural development, transportation, market regulation and other departments shall in accordance with the state provisions, study and formulate the evaluation requirements and criteria for the green enterprises and identification conditions, identification criteria for the green projects.

The municipal department of ecology and environment shall, in conjunction with the municipal development & reform department and other departments, coordinate the competent authorities of various sectors to set up a database for green projects in light of the evaluation requirements and criteria for the green enterprises and the identification conditions and criteria for the green projects, and introduce third-party organizations for evaluation and verification or organize experts to carry out scientific demonstration to include the green enterprises, projects and technologies into the database and conduct dynamic adjustments.

The Pudong New Area People's Government shall, in conjunction with the state financial management departments stationed in Shanghai and the municipal financial regulatory department, implement the national standards and industrial standards of green finance, and organize and set up the supporting system of the national green finance standards in Pudong New Area or the supplementary local green finance standards to unify the evaluation, identification and classification standards for the green finance products and projects in Pudong New Area.

Article 6

The Municipal People's Government shall support the state financial management departments stationed in Shanghai in the establishment of the reform pilot mechanism to promote the innovative regulatory interaction in green finance and other fields, and support the market participants including the financial institutions to carry out products and business innovation on the basis of effective risk control.

The Municipal People's Government shall encourage the state financial management departments stationed in Shanghai to carry out the implementation of the regulatory tools for financial technology innovation, and support the financial institutions which run green finance activities in Pudong New Area (hereinafter referred as financial institutions in Pudong New Area) to leverage the financial technologies to carry out the identification of the green projects and the measurement of their environmental benefits.

Article 7

The Municipal People's Government shall support the institutions of the State financial management departments stationed in Shanghai to guide the financial institutions in Pudong New Area, by means of improving the green finance evaluation systems, to formulate green finance development plans and improve the organizational mechanism, and set up the systems of performance evaluation, incentives, constraints and internal risk control.

When selecting cooperative financial institutions, Pudong New Area People's Government and the relevant departments shall regard the disclosure of their complementation environmental information and the results of their green finance performance evaluation as an important basis.

Article 8

This Municipality shall support financial institutions, financial infrastructure institutions and the relevant trading venues to provide financial services for the carbon-intensive, high environmental risks projects or market participants for their transition towards low-carbon and zero-carbon emission.

The Municipal People's Government shall support the institutions of the state financial management departments stationed in Shanghai in formulating the complementary financial transformation standards, classification and management rules while taking into account the actual situation and regional characteristics of Pudong New Area.

Article 9

This Municipality shall support the qualified domestic and foreign institutions to initiate the establishment of banks, securities, insurance, funds, trusts and other financial institutions which would provide financial services for the economic and social activities including environmental improvement, climate change combating, and efficient resource utilization and conservation.

This Municipality shall support the World Bank, the Asian Development Bank, the Asian Infrastructure Investment Bank and other related institutions in providing investment, financing and technical services for green projects, giving full play to the headquarters effect of the new development bank to promote the launch of the international cooperation projects for green finance in Pudong New Area.

This Municipality shall give full play to the trial advantages of the China (Shanghai) Pilot Free Trade Zone and the Lin-gang Special Area of the China (Shanghai) Pilot Free Trade Zone to provide more convenient cross-border investment and financing services for the green enterprises.

Article 10

This Municipality shall encourage financial institutions to respond to the international and domestic biodiversity finance-related initiatives and participate in the financial demonstration projects of biodiversity on the basis of the International Green Finance Cooperation Framework.

Pudong New Area People's Government shall encourage the financial institutions to advance innovation of business models, strengthen regional collaboration and participate in the financial demonstration projects of biodiversity.

Article 11

Pudong New Area People's Government shall, in accordance with the national deployment, launch the pilot programs of climate investment and financing, explore differentiated modes of investment and financing, strengthen the orderly investment of various funds by market means, innovate incentive and restraint mechanism, improve the linkage mechanism for capital allocation, and restrain high-carbon investment.

The financial institutions in Pudong New Area shall be supported to innovate the products and businesses of climate investment and financing.

Article 12

The institutions of the state financial management departments stationed in Shanghai shall encourage the banking financial institutions to implement the reform of funds transfer pricing mechanism, and support the development of green credit business by exploring the relevant structural monetary policy tools, regulatory evaluation, raising the tolerance of poor green credits, and such other methods.

The banking financial institutions in Pudong New Area shall optimize and innovate green credit products and services, expand the scale of credit, provide credit facilities and bring down the cost of green credit and integrate the environmental, social and governance requirements into their management procedures and comprehensive risk management systems.

Article 13

This Municipality shall support Shanghai Commercial Paper Exchange Corporation to provide technical support for the development of green bill, participate in the formulation of the green bill standards, and explore the green standards for the supply chain financing such as bill financing, accounts receivable financing and factorage financing.

The financial institutions in Pudong New Area shall be encouraged to develop their green bill business in reliance on Shanghai Commercial Paper Exchange Corporation, and give full play the targeted supporting role of green bill re-discount business, and provide high-quality payment financing schemes to the upstream and downstream enterprises of the green industry chain.

Article 14

Pudong New Area People’s Government shall explore the inclusion of the qualified major clean and low-carbon energy projects into the scope of projects supported by special bonds issued by local governments to support the construction of the regional green projects.

Pudong New Area People’s Government shall establish a reserve of green bond projects, encourage financial institutions, local financial organizations and enterprises to issue carbon neutrality bonds, sustainable development linked bonds and other types of bonds, and reduce the cost of bond issuance.

Pudong New Area People’s Government shall encourage the local financing guarantees institutions to provide guarantees for the bond issuance by the enterprises included in the scope of the green bond project reserve, and Shanghai Policy Financing Guarantee Funds for SMEs shall provide re-guarantee support in accordance with the provisions.

The qualified third-party institutions shall be encouraged to carry out green bond credit rating and reveal the green bond credit risks.

Article 15

The financial infrastructure institutions such as China Foreign Exchange Trade System, Shanghai Stock Exchange, Shanghai Clearing House, Cross-Border Interbank Payment and Clearing Co., Ltd., China Securities Depository and Clearing Corporation Limited Shanghai Branch, and Shanghai Headquarters of China Central Depository & Clearing Co. Ltd. shall provide convenient services for the issuance, registration, custody, trading, clearing and settlement of the green bonds. Financial institutions shall be encouraged to underwrite the bonds of green companies and enterprises, green debt financing instruments, supportive bonds of green assets, etc.

The institutions of the state financial management departments stationed in Shanghai shall support the China Foreign Exchange Trade System, Shanghai Stock Exchange and other financial infrastructure institutions in the market making of green bonds to systematically facilitate and support the financial institutions to carry out green bond market-making business.

Article 16

This Municipality shall support Shanghai Insurance Exchange in the establishment of a pilot platform of green insurance products for registration, clearing and settlement in Pudong New Area.

The branches of the insurance companies registered in the China (Shanghai) Pilot Free Trade Zone have the right to handle the green reinsurance inward business.

Article 17

The enterprises with high environmental risks that are involved in heavy metals, hazardous wastes, and toxic and harmful substances in Pudong New Area shall cover the environmental pollution liability insurance. The department of ecology and environment of Pudong New Area shall formulate and publish the annual list of the enterprises to be insured.

The institutions of the state financial administrative departments stationed in Shanghai shall establish an oversight mechanism of products and services of environmental pollution liability insurance. Shanghai Insurance Exchange shall build a pilot information management platform of environmental pollution liability insurance in Pudong New Area.

Article 18 This Municipality shall support the banking financial institutions to increase their financial support for the green financial leasing projects.

The financial leasing companies registered in Pudong New Area shall be supported to carry out the financial lease business of intangible assets including the green and low-carbon technology patents.

The financial leasing companies that are registered in Pudong New Area and carry out financial lease business in the fields of energy conservation and environmental protection, clean production, clean energy, ecology, green upgrading of infrastructure, and green service, with the approval of the state financial administrative departments, may enjoy a properly eased supervision restriction on the concentration and correlation of lease asset balances.

Article 19

This Municipality shall encourage the trust institutions in Pudong New Area to carry out green trust business through trust loan, equity investment, bond investment, asset securitization, public welfare (charitable) trust, etc.

Where a trust is established with real estate, an application may be made to the real estate registration institution to record such property as trust property. China Trust Registration Co., Ltd may pilot trust property registration in Pudong New Area and handle matters such as registration, statistics and transfer of green trust products.

Article 20

This Municipality shall encourage the financial institutions in Pudong New Area to follow a responsibility-based investment principle, include environment, society and governance factors in their investment decisions, and urge investees to improve environmental performance, reduce environmental risks and disclose environmental information.

The relevant departments shall provide convenience for the matters such as market participant registration and cross-border investment approval for the thematic funds of green investment.

Article 21

This Municipality shall support the private equity funds, venture capital funds and others to invest more in the green enterprises, green projects, green technology, etc.

The regional equity market operation institutions in this Municipality shall establish a transfer platform for the private equity and venture capital investment shares to carry out custody, transfer, pledge registration and other business of the private equity and venture capital investment shares. Where the registration of company equity pledge is otherwise provided by the State, such provisions shall prevail.

Article 22

This Municipality shall promote the qualified projects of clean and low-carbon energy, ecological and environmental protection and other fields to be included in the National Pilot Project Pool of the Real Estate Investment Trusts (REITs), and carry out pilot programs.

This Municipality shall support the various green equity investment funds based in Shanghai including the National Green Development Fund (NGDF) to focus on and make green investment in fields such as environment protection, pollution prevention and control, energy and resource conservation, green buildings, green transportation, and green manufacturing in Pudong New Area.

Pudong New Area People's Government shall rely on the government guidance fund or industrial investment fund to support the development of the green industry through joint investment of the government and society. The government may give the excess return on the investment attributable to its investment to social investors in a certain proportion.

Article 23

The relevant departments of this Municipality and Pudong New Area shall support the innovation and development of green and low-carbon technology according to the relevant provisions. The financial institutions in Pudong New Area shall be encouraged to carry out interaction business between equity and debt venture financing for the transformation and application of the green and low-carbon technology achievements.

Article 24

Shanghai Policy Financing Guarantee Funds for SMEs shall increase the guarantee support for micro, small and medium-sized enterprises carrying out green project financing, increase the proportion and quota of guarantee business for green financing, and offer them preferential rates. The relevant departments of the Municipal People’s Government shall improve the mechanisms of capital supplement, risk compensation, and performance appraisal.

The relevant departments in Pudong New Area shall offer supports such as financial subsidies for the micro, small and medium-sized enterprises with the guarantee of Shanghai Policy Financing Guarantee Funds for SMEs.

Article 25

This Municipality shall support financial institutions to carry out secured financing, repurchase, short-term loan and other business of environmental rights and interests, and promote financial institutions to become the direct trading subjects of Shanghai Environment and Energy Exchange.

This Municipality shall support the financial infrastructure institutions and financial institutions in Pudong New Area to carry out natural gas, electric power, hydrogen energy and other green derivatives and business according to laws, rules and regulations, and promote the financial infrastructure institutions and financial institutions in Pudong New Area to participate in creating and trading carbon derivatives and other related business according to the law.

Article 26

The market participants may register the guarantee related to environmental rights and interests and be responsible for the authenticity, completeness and legality of the registration contents. The Unified Registration and Publication System for Chattel Financing of the Credit Reference  of the People’s Bank of China, Shanghai Environment and Energy Exchange and other institutions do not substantively examine the contents of the guarantee registration.

Where circumstances such as a considerable reduction in the value of the carbon emission right on which the guarantee is set occur, the obligee to the guaranty may, according to the law or the contract, request the difference being made up, reducing the quota of loan, or call the loan in advance and handle the subject matter of the guarantee.

Where the debtor fails to fulfill the obligation as scheduled or any agreed circumstance for realizing the guarantee right occurs, the obligee to the guaranty may negotiate with the guarantor to convert the carbon emission right into money or auction or sell the carbon emission right. Where the transfer is made through Shanghai Environment and Energy Exchange, trade by agreement, one-way bidding, or other methods that meet the requirements may be adopted.

Article 27

Where the enterprises in Pudong New Area that have involved in key emission of greenhouse gas and environmental accidents obtain green finance service from the financial institutions in Pudong New Area, or local financial organizations, such enterprises shall provide relevant environmental information to the financial services providers.

Article 28

Where an enterprise in Pudong New Area having obtained green finance service from the financial institutions in Pudong New Area or local financial organizations falls under any of the following circumstances, the enterprise shall inform the financial services provider of the relevant information within five working days:

1. Changes on matters of administrative license concerned with environment protection occur;

2. Ecological and environmental emergencies occur;

3. Compensation for ecological and environmental damage or other incidents with a significant impact on the public and investors occur;

4. There are administrative penalties or prosecution for criminal liability due to ecological and environmental violations; or

5. The financial services provider requests for other environmental information.

Article 29

The legal persons of the banking financial institutions in Pudong New Area shall release annual environmental information reports according to the Guidelines for Financial Institutions Environmental Information Disclosure and other standards and requirements issued by the People’s Bank of China. The legal persons of the banking financial institutions in Pudong New Area shall be encouraged to carry out temporary disclosure of environmental information and increase the frequency and scope of such disclosure.

The financial institutions other than the legal persons of the banking financial institutions in Pudong New Area shall be encouraged to release annual environmental information reports, carry out quantitative analysis of the environmental risks such as environmental stress testing and include the analysis results in the information disclosure.

Article 30

Pudong New Area People's Government shall rely on the municipal big data resource platform to build a green finance data service thematic repository, explore the interaction and integration of the finance data and public data, establish a data connection mechanism with the platforms such as Smart Energy “Dual Carbon” Cloud Platform and Industrial Green Loan Comprehensive Services Platform, and promote the collection, integration, inquiry and sharing of the information according to the law.

Pudong New Area People's Government shall support the various market participants to use the green finance data service thematic repository, and promote the financial resources to accurately serve the enterprises and projects in the database for green projects.

Article 31

Pudong New Area People's Government shall rely on the green finance data service thematic repository to carry out digital cooperation with various third-party institutions, explore the establishment of carbon accounts for enterprises and natural persons (permanent residents), and include the enterprise carbon emission performance information and individual green and low-carbon activity information in their accounts to calculate the carbon scores.

The financial institutions in Pudong New Area shall be encouraged to offer preferential products or services for the enterprises and natural persons with high carbon scores.

The connection between the enterprise carbon accounts as well as natural person carbon accounts in Pudong New Area and the relevant platforms of carbon reduction incentives scheme in Shanghai shall be enhanced.

Article 32

The Municipal People's Government shall include the green finance development in the selection scope of Shanghai Financial Innovation Award, and conduct selection and give awards according to the requirements.

Pudong New Area People's Government shall incorporate the green finance development into the system of fiscal policies and provide special support for the such development, and increase the support for the following institutions with special funding in the relevant fields:

1. the financial institutions, financial infrastructure institutions, local financial organizations, enterprises, third-party institutions, etc. that meet the conditions for fiscal support; and

2. the green finance business department (business ) or green finance branch newly set up by the financial institutions in Pudong New Area that meet the conditions for fiscal support.

Article 33

Pudong New Area People's Government shall facilitate and support the attraction of high-level talents, urgently needed talents and outstanding young talents of green finance. Pudong New Area People's Government may grant household registration according to the provisions for the individuals that have made outstanding contributions to the green finance innovation projects and have received the Shanghai Financial Innovation Award.

Pudong New Area People's Government shall provide convenience and support for the foreign talents of green finance in the aspects of settlement, entry, exit, and work permits.

Pudong New Area People's Government shall support financial institutions, higher education institutions, third-party institutions and other organizations to carry out professional skill training of green finance.

Article 34

The people's courts and the people's procuratorates at all levels of this Municipality shall fully perform the judicial functions to provide judicial guarantee for the green finance innovation and development.

The people's courts and the arbitration institutions shall be supported to pay respect to the trade rules and practice in financial industries, and release typical cases of green finance. Shanghai Financial Court shall be supported to explore the testing mechanisms for the financial market cases and provide guiding rules for the financial market, and serve the green finance innovation.

Article 35

This Municipality shall support the third-party institutions that provide services such as green certification, environment consultation, asset appraisal, credit rating, digital service, carbon emission accounting, and environmental information disclosure report verification to carry out professional business activities according to the law.

The third-party institutions shall be diligent and conscientious to perform their duties. They shall, strictly in compliance with the requirements for data security as well as rights and interests protection, check and verify the authenticity, accuracy, and completeness of the documents and materials. Where the documents prepared or issued by a third-party institution contain a false or misleading statement or have material omission, and cause loss to other person, the third-party institution shall assume legal liability according to the law.

Article 36

The environmental rights and interests mentioned herein refer to the rights and interests arising from the government, for solving external problems, setting permits and total quantity control of the entities' natural resources and environmental capacity consumption.

The carbon emission right mentioned herein refers to the carbon emission quota allocated to the key carbon emission units within a specified period.

Article 37

These Provisions shall be effective as of July 1, 2022.