Impact Policy Tracker Policy

Shanghai’s Transition Finance Taxonomy



Officially launched in December 2023 and effective from January 2024, was developed by Shanghai’s financial and economic authorities, including the Local Financial Regulatory Bureau and the Shanghai branches of key national regulators. Formally known as the Shanghai Transformation Finance Catalogue (Trial), the Taxonomy is designed to guide investment towards the decarbonisation of heavy industries and support the shift to a low-carbon economy in Shanghai, China’s most populous urban area and one of the world’s leading financial centers.

The taxonomy provides a positive list of eligible activities within six high-emission sectors - water transportation, ferrous metal smelting and rolling, petroleum processing, chemical materials and products manufacturing, automobile manufacturing, and air transportation - and sets out clear decarbonisation pathways for each. Notably, shortly after its launch, Pudong Development Bank approved the first transition loan aligned with the taxonomy - CNY 310 million (approximately USD 43 million) for Spring Airlines.

Highlights

  • Local Governments as First Movers in Transition Taxonomies: Shanghai’s catalogue is part of a broader wave of local initiatives: by October 2024, at least 17 provinces and municipalities had released transition finance catalogues, with seven - including Huzhou, Chongqing, Tianjin, Hebei, Yingtan, Zhejiang, and Guizhou- publishing detailed guidance. These frameworks are typically developed through cross-departmental coordination between local financial regulators and industry authorities. Collectively, they have laid the groundwork for China’s forthcoming national transition finance taxonomy, currently being developed by the People’s Bank of China.

  • Transition Finance to Decarbonize High-Carbon Industries: Unlike sustainable or green taxonomies, China's transition taxonomies directly target emission-intensive sectors -such as power generation, steel, and petrochemicals- that account for about 75% of the country’s carbon emissions. By explicitly integrating decarbonisation pathways for these industries, Shanghai’s framework allows investment in fossil-fuel and other carbon-intensive industries, provided that projects include concrete and credible emissions reduction measures.

  • Strengthening China’s Evolving Taxonomy Framework: Shanghai’s transition taxonomy builds on China’s established leadership in green finance, notably through the 2015 Green Bond Endorsed Project Catalogue (the country’s first green bond taxonomy) and the China–EU Common Ground Taxonomy (2021). The Common Ground Taxonomy (CGT) aligns Chinese and EU approaches to climate mitigation and helps harmonize standards to lower the cost of cross-border green financing. Shanghai’s taxonomy adds a new dimension by explicitly enabling transition finance for carbon-intensive industries, advancing China’s taxonomy landscape from green-only frameworks to a more integrated system that combines green and transition finance with greater international interoperability.

Government’s Role:
Market Facilitator


Country:
China (City of Shanghai)

Policy Type:
Sustainable Finance Taxonomies

Year: 2023

Responsible Institution:
Shanghai Local Financial Regulatory Bureau, Shanghai Branch of the People's Bank of China, Shanghai Regulatory Bureau of the State Financial Regulatory Administration, Municipal Development and Reform Commission and other government departments

Additional information:
China green finance status and trends 2024-2025 <2025)
Comparison and Prospect of 17 Local Financial Transformation Catalogues in China (2024)

Sustainable Finance Taxonomies

What are Sustainable Finance Taxonomies?

Sustainable finance taxonomies provide a common language to classify and compare sustainable economic activities. They can be thought of as an encyclopaedia of sustainable activities: they list and define which sectors and actions qualify as sustainable based on specific criteria - either qualitative (e.g., social safeguards) or quantitative (e.g., emission thresholds). As such, taxonomies help assess whether activities align with sustainability standards and channel investments towards projects that support environmental and social objectives, while reducing the risk of greenwashing. As of July 2024, over 53 taxonomies have progressed worldwide, with 24 fully developed.

In practice, taxonomies are used by companies and investors to align portfolios, business activities, and financial products with sustainable objectives. Governments also use them to issue and enforce disclosure regulations, develop sustainability standards and labels, issue taxonomy-aligned bonds, and monitor progress on national and international commitments. While green taxonomies are the most widespread -focusing on activities that support environmental goals- there is growing interest in developing social taxonomies (e.g. the EU’s proposal to develop a Social Taxonomy), which aim to classify activities that promote social objectives such as human rights and equality.

For more information on taxonomies, visit SBFN Toolkit on Sustainable Finance Taxonomies (May, 2024), NATIXIS New Geography of Taxonomies (July, 2023) and PRI’s Implementation guide for sustainable investment policy and regulation tools: taxonomies of sustainable economic activities (June, 2022)