New report reveals policy-driven shift in steel finance and calls for targeted incentives. ESG BROADCAST shares key takeaways.
A landmark policy move by Hebei province in late 2023 has catalyzed a dramatic surge in transition finance within China’s steel sector, according to a new report released jointly by the Climate Bonds Initiative and Transition Asia. The Guidelines for Transition Finance in the Iron and Steel Industry, issued in December 2023, represent the first subnational directive of its kind and have since driven significant investment and financing activity aimed at decarbonizing one of China’s most emissions-intensive industries.
Hebei, the largest steel-producing region in China, led the charge by outlining a clear framework for transition-aligned financing tailored specifically for iron and steel enterprises. In response, the provincial market experienced a robust uptake: by the end of 2024, over USD2.8 billion in labelled transition loans had been secured by local steelmakers. Simultaneously, the national financial sector mobilized approximately USD3 billion through 12 labelled bond issuances linked to steel decarbonization.
The report estimates that the sector will require an additional USD18 billion in capital expenditure between 2026 and 2030 to implement a suite of low-carbon production technologies, including electric arc furnaces (EAF), direct reduced iron (DRI) systems, and hydrogen electrolyzes. These technologies are viewed as critical to aligning China’s steel production with its overarching net zero targets.
Alongside financing trends, the report also offers practical guidance for steel companies seeking to tap into the growing pool of transition finance. Recommendations include the development of bankable decarbonisation roadmaps, robust emissions baselining, and proactive disclosure aligned with China’s sustainability regulation landscape. The report also calls on policymakers to introduce incentives such as preferential loan rates, tax breaks, and mandatory green procurement criteria to further drive market transformation.
“The rapid uptake of transition financing in China’s steel sector highlights the power of clear, credible guidance to mobilize capital at scale,” said Wenhong Xie, Head of China Programme at Climate Bonds Initiative. “As the world’s largest steel producer, China has a unique opportunity—and responsibility—to lead the global shift toward low-carbon steel.”
Bonnie Zuo, China Engagement Lead at Transition Asia, noted that the ongoing preparation of China’s 2026–2030 national economic development plan provides a timely opportunity to embed climate-aligned financial structures. “There is a critical window to align policy frameworks to facilitate low-carbon development in the steel sector,” she said. “Strategic investments in hydrogen-based DRI, scrap steel recovery, and transparent approaches to sharing the ‘green premium’ will be essential.”
Strategic significance lies in the fact that Hebei’s guidelines have served as a regulatory blueprint, not only unlocking capital for immediate decarbonization projects but also demonstrating the catalytic role that provincial policymaking can play within China’s broader climate finance framework. The rapid deployment of transition finance tools—ranging from loans and bonds to potential equity and insurance mechanisms—suggests that a more diverse and mature ecosystem is now emerging to support corporate sustainability across the heavy industry sector.
ESG BROADCAST will continue monitoring the updates related to this topic. Stay tuned to be updated on the related policy and pivotal regulatory shift.
