Introduction to Climate Governance
With the world facing escalating climate risks, the need for robust and cooperative climate governance has become increasingly urgent. The collaboration between China and the European Union can serve as a model for climate leadership, leveraging their strengths in renewable development, technological innovation, and financial regulation.
The Role of Supervisory Approach
A supervisory approach, particularly in sustainable finance, is a crucial tool in the transition to a greener future. Central banks and financial regulators have evolved from mere risk managers to enablers of industrial decarbonization. The partnership between China and the EU, grounded in supervisory collaboration, can provide a model of climate leadership characterized by prudence, inclusiveness, and institutional foresight. Hungary, through its central bank, the Magyar Nemzeti Bank (MNB), can play a pivotal role as a bridge in this process.
Global Climate Governance
Global climate governance demands deep-rooted stability and long-term foresight. China’s ancient concept of tianxia ("all under heaven") embodies an inclusive worldview grounded in harmony, continuity, and responsible leadership. This concept reflects China’s unparalleled state continuity, offering a model of resilient governance that spans millennia. In an era marked by rising fragmentation and short-termism, China’s emphasis on continuity, stability, and long-term stewardship is a vital message to global climate governance.
China-EU Partnership
The EU and China have laid a solid foundation for their partnership, with cooperation on environmental issues dating back to the 1990s. The creation of a high-level dialogue mechanism on climate and the environment in 2020 has further consolidated their green partnership. Xie Zhenhua, China’s first special envoy on climate change, has highlighted the potential for China and the EU to work together in promoting global climate governance, advancing global green transformation, and exploring diverse, just, and inclusive transformation paths.
Sustainable Finance Supervision
There are clear synergies and differences between the Chinese and European approaches to sustainable finance supervision. Both share a goal in developing green taxonomies, conducting climate-related stress testing, and enhancing the quality and comparability of environmental, social, and governance (ESG) disclosures. However, differences remain, particularly on emissions intensity benchmarks and sector-specific thresholds. The MNB has adopted a green mandate, launching green bond programs, conducting climate stress tests, and introducing green preferential capital requirements, offering useful reference points for building convergence between EU and Chinese supervisory regimes.
Fostering a Common Language of Sustainability
To foster a "common language of sustainability," targeted dialogue mechanisms and a shared sustainable finance data hub should be established. The MNB’s accession to the Capacity-building Alliance of Sustainable Investment (CASI) and its co-hosting of a joint financial webinar with CASI on managing climate-related risks are notable steps in this direction. CASI, a Beijing- and Hong Kong-based international initiative, aims to ensure the global availability of well-trained experts in sustainable investment.
The Evolving Role of Central Banks
The role of central banks is undergoing a fundamental transformation, from focusing solely on monetary and financial stability to embracing environmental stewardship as a core mandate. As key facilitators of industrial decarbonization, regulators in both China and the EU should collaborate in designing and deploying effective supervisory tools. By integrating green aspects into supervisory practice, the MNB has shown how central banks can safeguard financial stability while redirecting capital toward low-carbon sectors, influencing the broader trajectory of industrial transformation.
Deepening Collaboration
This year marks the 50th anniversary of the establishment of China-EU diplomatic relations, providing a symbolic opportunity for the two sides to deepen their collaboration. With a shared goal and a growing legacy of cooperation, China and the EU have the intellectual, institutional, and financial capital to shape global climate governance. Through supervisory leadership, sustainable financing, and institutional diplomacy, they can co-build a sustainable future that is green, inclusive, and resilient.
Conclusion
Sustainable financial diplomacy can foster regulatory trust and mutual understanding, with joint supervisory projects, shared training initiatives, and a commitment to data transparency turning divergence into dialogue. The Hungarian central bank, with its CASI membership and commitment to knowledge exchange, can serve as a bridge between EU and Chinese regulatory systems. As the world navigates the challenges of climate change, the partnership between China and the EU, facilitated by countries like Hungary, can provide a beacon of hope for a more sustainable and resilient future.
