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The People's Bank of China (PBOC) will promote the use of green finance and cooperate with global counterparts in the next five years to prevent systemic financial risks resulting from changes in the environment and climate, officials said on Saturday.

The central bank will launch polices under China's 2021-2025 Plan, including optimizing green finance standards, strengthening lenders' green performance evaluation and disclosure and widening current pilot projects, Deputy Governor Chen Yulu said at a meeting of the China Green Finance Committee.

China was the biggest issuer of green loans with over CNY11 trillion outstanding on June 30, while its outstanding green bonds totaled CNY1.2 trillion, the second highest in the world, Chen noted. China also issued "Anti-Covid 19" green bonds and welcomes other countries to develop its huge green finance market, Chen said.

The financial sector must understand how long-term risks of environmental degradation and climate change shift to financial risks, Chen said.

--COLLATERAL DAMAGES

Climate change, with uncertain scale and timing, risks damaging lenders' loan collateral and asset quality, said Wang Xin, the head of the PBOC Research Bureau. The mandate of the central bank, including monitoring macroeconomic indicators, such as industrial output and employment, would be impacted by climate change, he said.

China can widen the practice of green finance by deploying structural tools targeting specific industries and regions in coordination with fiscal policies in extreme situations, and the PBOC is developing relative models and conducting pressure tests to promote green finance, said Wang.

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