As 2026 marks the start of China's 15th Five-Year Plan and a critical window for peaking carbon emissions, the domestic green finance sector has evolved over the past decade from foundational system-building to rapid scale expansion, with green credit and bond volumes ranking among the world's largest. During this progression, the industry's strategic focus has shifted from sheer growth to enhancing development quality.

Addressing persistent challenges such as information asymmetry, digital technologies including artificial intelligence (AI), big data, blockchain, and satellite remote sensing are emerging as key solutions. At the annual conference on digital-enabled green finance innovation held by the Central University of Finance and Economics' International Institute of Green Finance on September 12, experts delved into the integrated development of digital technology and green finance, agreeing that while these tools unlock innovation potential, they also present real hurdles like computing resource consumption, data silos, and climate physical risks. The consensus points to a need for balance among innovation, risk prevention, and serving the real economy.

Traditionally, environmental benefit data in green finance has relied heavily on corporate self-reporting, making manual verification costly and inefficient while leaving room for practices like "greenwashing." With broader adoption of digital technology, financial institutions can now automate data collection from multiple sources, conduct cross-verification, and store records on-chain, reducing audit costs and improving climate risk identification and measurement, while also building a data foundation for transition finance products in high-carbon sectors.

Zhao Yingmin, former Vice Minister of Ecology and Environment and Chair of the BRI International Green Development Coalition, emphasized that intensifying global climate risks make green, low-carbon transition an irreversible trend and a core requirement for China's high-quality development. Digital technology is providing crucial support for green finance to progress from quantitative growth to qualitative improvement, with tools like big data, satellite remote sensing, and blockchain enabling automated environmental data collection and cross-verification to resolve issues around quantifiability, verifiability, and traceability of green project benefits.

However, technological integration is not merely conceptual layering, as efficiency gains bring new risks. While discussions on computing power typically focus on electricity consumption, Wang Xin, Director of the People's Bank of China Research Bureau, highlighted that AI's rapid growth also exerts significant pressure on water resources. Wang cautioned that AI computing centers' substantial water use could trigger fourfold risks, including ecosystem degradation, impacts on water-intensive industries like agriculture, threats to public water access, and even water cycle imbalances that could affect financial stability, advocating for coordinated consideration of AI development, energy transition, and water efficiency.

Beyond resource constraints, AI also introduces potential market disruptions. Lin Shan, Deputy Director of the Ministry of Finance's International Economics Center, warned of AI financing crowding out green investments and related transaction security concerns. As global capital concentrates on AI, it fuels valuation bubbles while diverting funds from energy innovation and low-carbon transitions. Additionally, converging data sources among large models could create algorithmic herding effects, triggering synchronized trades during market volatility and amplifying systemic risks, all under a global framework lacking comprehensive regulatory oversight for AI financial applications.

Taking a balanced view on AI's energy consumption, Zhao Yingmin noted that while computing facilities add electricity demand, AI's broad application across industry, transportation, and construction can achieve revolutionary efficiency gains, generating carbon reductions several times greater than its own emissions. Rather than opposing computing power and green transition, he advocates for synergetic development where green electricity empowers computing infrastructure.

Addressing water consumption risks, Wang Xin suggested improving disclosure mechanisms by incorporating water efficiency metrics into green computing certification, innovating sustainable financial products linked to water usage efficiency, exploring inclusion of AI enterprises in water rights trading markets, and strengthening fiscal and financial support for AI-water resource coordination.

While digital technology offers breakthroughs in resolving information asymmetry, some obstacles remain beyond technological reach. Industry practice shows green finance is extending into areas like ecological product value realization, energy system transition, and green trade, all bearing low-carbon transition needs but facing shared challenges of difficult value quantification, asset rights confirmation, and unproven commercial sustainability models.

Policy directions for the 15th Five-Year Plan emphasize establishing mechanisms for ecological product value realization through locally adapted channels. Given that most ecological regulation services possess public goods attributes with long payback periods and low returns, these projects often struggle with financing and collateral. Li Zhong, Deputy Director of the National Development and Reform Commission's Energy Research Institute, urged financial institutions to incorporate ecological asset usage and operation rights into collateral scope, advance securitization of ecological assets, and leverage digital technologies like satellite remote sensing, big data, and AI to optimize credit processes and risk control, enhancing accessibility and convenience for ecological product value financing.

In the energy transition arena, 2025 data shows thermal power's share of China's 3.89 billion kilowatts of installed generation capacity fell below 40% for the first time, with wind and solar capacity surpassing thermal. Yet coal power continues to serve capacity assurance and peak-shaving functions. As flexibility retrofits progress, coal power revenue now extends beyond electricity sales, with capacity payments and ancillary service compensation gaining share.

Research released by the Central University of Finance and Economics' International Institute of Green Finance on financial support for coal-power and new energy integration identifies three main pathways: physical coupling, system coupling, and resource compounding, commercialized through mergers, special purpose vehicles, joint ventures, and long-term agreements. While credit, bonds, funds, and insurance are increasingly participating, deepening integration from single projects to asset portfolios and system coordination demands greater institutional capability in assessing multi-party governance, portfolio cash flows, and mechanism-based revenues such as capacity payments and ancillary services. Future improvements are needed in portfolio asset valuation, mechanism-based revenue financing, and long-term risk-sharing arrangements to enhance financiability of coal power transition and new energy coordination.

On international trade, escalating green regulations abroad are compelling domestic export industries like light manufacturing to accelerate green transformations. Zhang Jie, Vice President of the China Chamber of Commerce for Import and Export of Light Industrial Products and Arts-Crafts, noted that while the sector's 2025 trade volume reached $1.15483 trillion with a surplus of $668.09 billion, it faces multiple green barriers including EU carbon tariffs, plastic restrictions, mandatory sustainable aviation fuel policies, and packaging waste regulations. The chamber has already launched carbon labeling and dual-carbon disclosure platforms to promote industry greening.

Addressing these sector-specific bottlenecks, experts identified clear directions: leveraging digital technology to improve market-based accounting systems for ecological value and promote financial application of GEP and VEP accounting results; innovating assessment models for coal-new energy integrated projects and establishing rights confirmation and pledge mechanisms for new revenue streams; and coordinating government, industry, and corporate efforts to build green trade development systems that overcome international barriers.

Beyond supporting low-carbon transitions across industries, experts stressed that green finance must confront the tangible impacts of increasingly frequent extreme climate events. Physical climate risks are no longer distant scenarios; financial systems need to build resilience frameworks alongside transition support, addressing climate adaptation capacity gaps.

Building such frameworks faces dual obstacles in awareness and data. Lyu Xuedu, former Chief Climate Change Specialist at the Asian Development Bank, noted cognitive gaps in understanding climate risks and misallocated global resources, with most funding directed to mitigation while adaptation receives insufficient attention. Data silos across meteorological, hydrological, natural resource, and financial sectors hinder transmission of physical climate risk information and early warning chains. Lyu believes comprehensive prevention and coordinated measures can substantially reduce both physical and financial risks from climate change.

From an operational perspective, Chen Yaqin, Deputy General Manager of Industrial Bank's Green Finance Department, explained that climate risk stress testing helps banks identify asset exposures in high-risk sectors and vulnerable regions, but due to scenario assumptions and data limitations, it currently applies mainly to medium- and long-term macro risk management rather than precise single-loan pricing, often translating into indirect controls like industry limits and collateral ratio adjustments. Since adaptation projects have strong public welfare attributes and weak cash flows, purely commercial credit cannot achieve closed business loops, necessitating blended finance models.

The insurance industry, as a core risk buffer, is also transforming. Yang Xi, Acting Assistant General Manager at China Pacific Insurance Group's ESG Office, described the shift from traditional post-disaster claims toward proactive risk reduction services using meteorological disaster data and IoT devices for risk profiling and disaster warning systems. However, sustained risk prevention investment coupled with unpredictable disaster occurrence creates cost-benefit mismatches, leaving quantification of risk reduction benefits unresolved.

Compared to mature carbon reduction market mechanisms, climate adaptation and risk resilience remain weak links in green finance, lacking systematic governance frameworks and financing paradigms. Lyu Xuedu summarized the path forward: establishing a two-tier coordination system where macro-level government-led institutional coordination clarifies projects' public attributes and implementation direction, while project-level collaboration engages different financial institutions leveraging professional advantages to manage risks and fill funding gaps, creating systematic financing models suited to climate resilience building.