264.3 China’s blue finance taxonomy development and future applications In China, domestic financial institutions have followed international developments, intensified financial innovation, introduced policy guidelines and expanded blue finance practices. However, China’s current green finance standards for identifying blue activities reveal several issues, including fragmented standards and regional disparities; fragmented industry coverage; lack of technical details and data support; uneven alignment with international standards; and lack of monitoring, evaluation and incentive mechanisms. China has not issued a nationwide guideline for blue finance, relying instead on green finance standards that inadequately define sustainable marine economic activities. Regional and institutional differences in classification standards hinder the large-scale development of blue finance. Policies vary in their definitions of the “blue economy,” with emerging sectors like marine carbon sink trading and blue carbon finance facing financing constraints. Some policies lack quantitative indicators and actionable guidelines, increasing the risk of “blue-washing.” While some standards reference international guidelines, most local policies focus on domestic needs and lack integration with international carbon markets, limiting cross-border cooperation. Additionally, most policies lack dynamic tracking mechanisms and regular evaluations, reducing market confidence in the effectiveness of blue finance initiatives. Over the past two years, local governments in China have carried out a number of explorations and practices of blue finance standards. In 2024 the Yantai government and the Institute of Finance and Sustainability (IFS) jointly compiled and released a blue investment and financing industry support catalogue70, which for the first time compiled a qualitative and quantitative system for financial institutions to identify and invest in blue economic activities. The Yantai catalogue contains five main elements: 1) Establishment of four objectives. The key to defining SBE activities is the establishment of environmental and social objectives for economic activities. Aligned with SDG14 and China’s 14th FYP for Marine Ecological and Environmental Protection, the blue finance standard encompasses four objectives: sustainable use and protection of marine resources, prevention and control of marine pollution, protection and restoration of biodiversity and ecosystems, and climate change mitigation and adaptation. 2) Principles. The definition of SBE activities should follow principles that guide industry activities and indicator selection. • Substantial contribution: SBE activities should significantly contribute to one or more of the four environmental objectives. • DNSH: These activities should not negatively impact the oceans or the sustainable use of resources. • Adaptation to latest developments: Activities should be 70“蓝色金融标准和产品创新”, Institute of Finance and Sustainability, 2024, https:/ /www.ifs.net.cn/news/1769 .continuously updated and improved to align with the evolving ocean economy, policy environment and development priorities, ensuring compliance with national and international sustainable development standards. • Inclusiveness: From a just transition and social perspective, SBE activities should support the livelihoods of local residents and effectively communicate with local communities. 3) Blue finance industry classification. The Yantai government and IFS screened ocean-related economic activities based on industrial classification for ocean industries and their related activities. They omitted industrial activities that have significant negative impacts on the marine ecosystem, such as the marine oil and gas industry, the marine mining industry, and the marine engineering and construction industry. They then defined SBE activities based on blue finance standards, including the Chinese and international standards, to facilitate the identification of SBE activities by financial institutions. This culminated in the shortlisting of 12 primary, 41 secondary and 84 tertiary industries. 4) Indicator system. Blue finance, a subset of green finance, focuses specifically on the sustainable development of the marine economy and ecological protection, areas not fully covered by green finance standards. In constructing its indicator system, the Yantai government and IFS first defined 15 primary ocean industries. They then identified SBE activities based on both national and international blue finance standards. These activities address internationally significant issues like near-shore pollution control, plastic pollution reduction, and plastic replacement, as well as key concerns for China, such as the development of the aquaculture industry. 5) Application. Local governments and regulatory agencies can combine the development priorities of the blue industry in their regions, compile a blue finance project database and formulate targeted support policies. Financial institutions can formulate regional blue industry investment and financing programs to quickly screen and financially support their clients’ SBE activities. Enterprises can formulate plans for the sustainable development of relevant marine industries and carry out environmental information disclosure. In marine fisheries, relevant certification activities have been included to ensure the sustainability of fishing operations, facilities and supply chains, thereby supporting the sustainable development of aquaculture fishing enterprises. In shipbuilding and maritime transport, support has been provided for green alternative fuels for ships and the application of new energy technologies, such as liquefied natural gas, to promote the green manufacturing of ships and their supporting equipment. In port construction, efforts have been made to promote the development of zero-carbon and near-zero-carbon ports, facilitate zero- carbon energy supply, optimize the energy consumption structure, and reduce the carbon footprint of the logistics chain. Additionally, local blue finance standards have been developed by the governments of Weihai and Xiamen. China is currently promoting the development of a national blue finance standard, with IFS involved in the process.

Advancing China's Sustainable Blue Economy 2025