Carbon finance is a variety of financial institutional arrangements and financial trading activities that serve to reduce carbon emissions, including trading and investment in carbon emission permits and their derivatives, investment and financing for low-carbon project development and other related financial intermediation activities, in a market design gradually achieved by the legal system and policies.

Carbon finance principally revolves around traditional forms of green credit, green bonds and green industry funds to meet the investment and financing needs of enterprises during low-carbon transformation. However, due to the limited scale of the carbon emissions trading market, financial institutions are still in the exploratory stage of accepting carbon emission permit as collateral for financing, and most of the transactions are the “initial” or “first” pilot practice of financial institutions.