Experts have called for tailored reform to address the low profitability of climate-friendly investment, following the country's recent initiation of a think tank to tap the potential of financial instruments in the sector.

Launched by five central government bodies, including the Ministry of Ecology and Environment and the People's Bank of China, the Climate Investment and Finance Association vows to promote academic research on climate investment and build itself into "an authoritative, professional institution and high-end think tank with global influence".

M Teresa Kho, deputy director-general of Asian Development Bank's East Asia department, commended the initiative, referring to climate investment and finance as an issue with global significance.

"We are very pleased to see that the People's Republic of China continues to take a lead role in global climate change efforts, this time on promoting climate finance," she said while addressing the launch ceremony of the association on Oct 29.

She said that based on ADB's study, developing Asia needs $1.7 trillion per year through 2030 to maintain its growth momentum, eradicate poverty and address the impacts of climate change. The annual investment gap is $459 billion, of which $129 billion per year is attributed to climate adjustment.

"To address this investment gap, financing reform should be introduced to attract social and private investors. Given the global nature of climate change and its adverse impacts, we believe that climate finance is of utmost importance and should be mobilized globally," she said.

While endorsing the importance of climate investment and finance, Chinese experts said the country still has to remove a series of hindering factors for promotion of the instrument.

Lu Zhengwei, chief economist of Industrial Bank, said China has yet to set up a mechanism for sustainable development of climate investment and finance, and keep it separate from green investment and finance.

There are even now very limited applications of green finance, though the concept is frequently mentioned as something good.

As a basis for the development of climate investment and finance, systems for classification, monitoring and verification should first be established in the country, he said.

It is also important for the government to figure out in which sectors preferential policies could play a role and then draft policies accordingly, he said.

Lu said climate-friendly investors could also be given preferential claims to assets in cases of bankruptcy.

"Currently, the nonperforming loan ratio in the country's green loans is lower than the general level," he said.

This means that the percentage of money required to be held in reserve could be lowered, freeing up more financing for green investment, he said.

Sun Yiting, senior adviser at CECEP Consulting Co, said it's important to keep the country's industrial investment policy stable, as returns of climate investment are not likely to be seen in a short term.

Industrial policy usually has wide-ranging and far-reaching effects, and changes may damage investors' earnings and make them hesitate to invest in climate-friendly projects, he said.