BEIJING, April 25 (Xinhua)– China has taken on a tough task: it has made the world’s most ambitious commitment to fighting climate change while promising medium-to-high speed economic growth in the next five years.

China signed the Paris Agreement on Friday and will ratify it before September. As a major carbon emission contributor and the world’s largest developing country, China is facing the challenge of meeting environmental targets while maintaining growth.

The answer to the challenge is green finance, which has progressed fast and fruitfully since last year.

Green finance uses institutional and policy arrangements to encourage more investment in energy-saving and environmentally friendly projects via financial products and services such as green loans, bonds, stocks, private equity, insurance and carbon emissions trading.

“The rapid economic growth achieved in the last decades has been reliant on coal-based energy consumption, road-based transportation and a carbon-intensive industrial structure. Green finance is key to leveraging investment to power China’s transition to a green and sustainable economy and enjoys huge potential and bright prospects,” said Chen Yulu, vice governor of People’s Bank of China (PBOC) at the 2016 China Green Finance Forum which was held Saturday.

Green finance is now part of China’s national strategy since being first mentioned in September 2015 and is outlined as one key task in the plan for the next five years.

However, money is a problem if the government is to finance a sustainable future. At least two trillion yuan (307.7 billion U.S.dollars) will be required each year to address environmental issues and climate change, but public investment alone is far from sufficient, only offering about ten percent of the total, according to a report by China Institute of Finance and Capital Markets, a think tank affiliated with China’s securities watchdog.

“It’s crucial to motivate the private sector, the largest source of capital for the green transition, to ensure sustainable investment in green sectors for environmental protection and industrial upgrading,” said Wang Xiaokang, board chairman of China’s largest green enterprise China Energy Conservation and Environmental Protection Group.

China is a pioneer in the global green investment market, with a sound green finance mechanism gradually taking shape.

In December 2015, China became the first country to issue official rules on green bonds. Both stock exchanges rolled out pilot corporate green bonds in March and April 2016, while PBOC is mulling developing green bonds service for local markets. G20 set up a specific research team on this issue under China’s proposal and included green finance in its communique for the first time ever.

China replaced the United States as the top issuer of green bonds in the first quarter (Q1) of 2016, with 7.9 billion U.S. dollars of green bonds issued in Q1, nearly half of the global total, according to a report by credit rating agency Moody’s.

However, there is still a lot to do, ranging from policy through ideas to products, Chen pointed out.

Li Haisheng, a senior official with China Council for International Cooperation for Environment and Development called for more attention on challenges such as poor liquidity, information asymmetry and lack of training.

“The banking sector should develop a stricter review system to select true green firms while industrial watchdogs should keep an eye on them constantly. Meanwhile, green development funds can be established to encourage private investment to contribute,” Li added.