InChina,greenfinanceisacomprehensiveprogramcoveringtheentirefinancialsystem.Sinceitsemergence,anumberofkeytrendshaveshownup.
Thepolicysystemcontinuestoimprove.SincethelaunchoftheGuidelinesforEstablishingtheGreenFinancialSystemin2016,governmentdepartmentshavebeendevelopingandimplementingpoliciesatincreasinglydetailedlevels.OnecaseevidencingthegrowingambitionoftheChinesegovernmenttodevelopgreenfinanceisthePeople鈥檚BankofChina(PBoC)usingitsmedium-termlendingfacility(MLF)specificallytosupportthegreeneconomybyallowinggreenbondsascollateral.Furthermore,theAssetManagementAssociationofChina(AMAC)recentlypublishedadraftversionofitsgreeninvestmentguidelinestogetfeedbackfromChineseinvestors.
Manygreenfinancetoolsarematuring.Today,greencreditaccountsforninepercentofallthecreditissuedbybanksataround8trillionyuan.Greenbondsremainedstableat248.6billionyuanofannualissuancein2017andasimilarlevelsofarin2018.Thenumberofgreenfundshasincreasedto265withcontinuedexpansionpredictedthisyear.GreenPPPsnownumbermorethan8,000withatotalvaluesurpassing7trillionyuan.Greeninsurancehasexpandedtoatotalriskcoverageofabout28billionyuanaftergrowingrapidlyin2017.Ofparticularnoteisthedevelopmentofenvironmentalrightstrading.Chinaisscalingupitscarbontradingsystem.Theplantoestablishanationalscheme,publishedinDecember2017,hasmappedoutconcretesteps.Aftertwotothreeyears,thenationalschemewillbeinplace.Whileitcurrentlyonlycoverstheelectricitysector,sevenadditionalsectors,includingthepetrochemicalindustry,chemicalindustry,constructionmaterials,steel,metal,paperandaviation,willbeincludedtobringhalfofChina鈥檚totalemissionsintothecarbontradingsystem.
ESG(environmental,socialandgovernance)integrationisacceleratingasinvestorsbecomemoreconsciousofgreenfinanceprinciplesandpractices.Themainchallengeistoconvinceinvestorsthatsustainableinvestmentscanbeprofitable,aconceptthatissupportedbyresearchresultspublishedbyMorganStanleyCapitalInternational(MSCI),OxfordUniversityandArabesque(amultinationalassetmanagementcompany).Greeninvestmentisoftenperceivedasriskier,whichisnotnecessarilytrue.InfurthersupportoftheESGbusinesscase,recentresearchbytheBankofInternationalSettlementsandNatixispointedoutthatgreenbondsactuallycarrylowercouponratesthanotherbondswithsimilarmaturities.Tohelpinvestorsgraspenvironmentalrisks,in2018theInternationalInstituteofGreenFinancelaunchedareportalongsideUNEPFIandUNPRIspecificallyonESGintegrationintheChineseassetmanagementindustry.
Localgreenfinanceisexpandingrapidly.Thisincludesbothdesignatedgreenfinancepilotzonesandnumerousvoluntaryprograms.Currently,Zhejiang,Guangdong,Jiangxi,GuizhouprovincesandXinjiangUygurAutonomousRegionhavebecomepilotareas.Suchinitiativesarepredictedtoexpandinthecomingyears.Allpilotzoneshavemadeprogressinsupportingpolicies,organizationalstructure,productsandservicesinnovation,marketconstructionandinstitutionaldevelopment.Guangdonghaslaunchedanumberofincentiveschemesforgreenfinanceincludingguaranteesandinterestratesubsidies.Xinjianghasestablishedgreenprojectplatforms.Jiangxiispromotingthemarketizationofecologicalcompensationthroughatradingsystemthatprovidestrainingforallrelevantstakeholders.Inresponsetothenationaltop-leveldesignforgreenfinance,over10provincesandautonomousregionsnotcoveredbythepilotprogramhavealsoreleasedpolicyframeworksongreenfinance.
TheChinesegovernmentisincludingcriticalgreencomponentsintheimplementationoftheBeltandRoadInitiative.ThisisprominentlyunderlinedinthedocumentsEnvironmentalRiskManagementInitiativeforChina鈥檚OverseasInvestmentbytheChinaGreenFinanceCommitteeandGuidanceonPromotingGreenBeltandRoadbyChina鈥檚StateCouncil.ThesedocumentshighlighttheimportancethatChinaattachestoreducingtheenvironmentalandsocialrisksofitsoverseasinvestments.ThisisofgreatinternationalimportancebecausetheInitiativewelcomescontributionsfrommanystakeholdersaroundtheglobe.
KeyChallenges
OneofthekeychallengesforfurtherdevelopinggreenfinanceinChinaisthelackofclearandharmonizedstandards.ThereareanumberofstandardsrelatedtogreenfinanceinChina,buttheydifferfrominternationalstandards.Tosolvetheproblemofharmonizingstandards,theNationalDevelopmentandReformCommissionisdevelopingagreenindustrycatalogue,whichwilllaythefoundationfordefining鈥榞reen鈥檃crossthefinancialsector.Chinaistheworld鈥檚second-largestgreenbondmarket,andtheincreasinginternationalizationofChinesebondissuersandinvestorsisimpactingglobalstandards.Itisimportanttounderstandthatwithdifferentlevelsofdevelopment,economicstructuresandenergysystems,countrieswillhavedifferentdefinitionsof鈥榞reen.鈥橝spartoftheeffortstoharmonizegreenbondstandardsbetweenChinaandtheEU,theChinaGreenFinanceCommitteeunderthePBoCandtheEuropeanInvestmentBankundertheEUjointlyissuedawhitepaperoutlininghowinternationalgreenbondstandardscanbeharmonized.Andworkoncompatibilitywillcontinueintheforeseeablefuture.Whileexpectedtobecompatible,greenfinancestandardsshouldalsobeflexibletoreflectlocalcircumstancessuchasdevelopmentstage,naturalresourceendowment,industriallayoutandenergycomposition.
March26,2018:LordMayorofLondonAldermanCharlesBowmanandDr.MaJun,directoroftheGreenFinanceCommitteeoftheChinaSocietyforFinanceandBanking,signanagreementonstrategiccooperationatthelaunchceremonyoftheChina-UKGreenFinanceCenterinBeijing.VCGAnotherchallengeisthatinvestorsandcompaniesarenotadequatelyconsciousofenvironmentalrisks.Thisisoftenduetoalackofrelevantenvironmentalinformationatcorporatelevelthatcanbequantifiedandanalyzed.Totacklethisproblem,environmentalinformationdisclosureisgraduallybecomingmandatoryforlistedcompanies.In2018,alllistedcompaniesarerequiredtoeitherdisclosethisinformationorprovidejustificationforrefusing,whichisexpectedtoinspireadisclosurerateofmorethan90percent.By2020,itwillbemandatoryforalllistedcompaniestodiscloserelevantenvironmentalinformation.Inthisregard,itisimportanttonotethatmostlargeChinesecompaniesarepubliclylisted,evenstate-ownedenterprises.Thisprovidescriticalinformationforallstakeholderstowiselymakefinancingdecisions.
WhilegreenfinanceinChinaisalreadyconsideredsuccessful,thescaleneedstoexpandcontinuously.Despitetheimpressivegrowthofgreenloansandbonds,thenumbersarestillrelativelysmallcomparedtothefinancialsystemasawholeandincreasingdemandforgreeninvestment.Expandingitrequirespublicresourcestomaximizetheabilitytoleverageprivatecapital.Tothisend,anumberofinitiativeshavebeencarriedout,suchastheexpansionofgreenPPPs.publicunderstanding.Sincemoreandmorepeopleareengagedingreenfinance,knowledgeaboutgreenfinanceshouldbetterpermeatealllevelsofstakeholders.Bettercommunicationbetweenthegovernment,financialinstitutions,companies,intermediaries,researchers,andthepublicisnecessary.Inthisprocess,theGreenFinanceCommitteeofChinaSocietyforFinanceandBankingplaysacrucialrole.
Also,bettercommunicationongreenfinanceisneededtoimproveMay27,2017:TheChang鈥檃nLandfillGasCleanDevelopmentMechanismProjectbeginsoperationinChengdu,capitalofSichuanProvince.Itgeneratespowerofabout166millionkilowatthourswhileeliminatingemissionsof900,000tonsofcarbondioxideeachyear.VCGDrivingGreenFinanceGlobally
Thelastcoupleofyearshavebroughtseveralmonumentalshifts,andthemostglaringchangeistheUnitedStates鈥檔ewapproachtoforeignpolicy.Amidincreasingunpredictabilityandfragmentation,Chinaandmanyofitspartnersareworkingtogetheraspillarsofstability.Thisisparticularlytrueofclimatechangegovernanceandgreenfinance.
UndertheG20,Chinapioneeredtheagendafordevelopingandsupportinggreenfinance.DuringChina鈥檚G20presidency,greenfinancebecameakeythemeatthemeetingforthefirsttime.TheG20GreenFinanceStudyGroupwaslaunchedaspartofanefforttosupporttheG20鈥檚goalofstrong,sustainableandbalancedgrowth.ThisinitiativecontinuestodaythroughthelatestG20summitinHamburgandwilladvancefurtherin2018inArgentina.
AnotherinternationalgreenfinanceinitiativepromotedlargelybyChinaisfocusedoncentralbanksfortheircriticalroleintheefforttogreentheglobalfinancialsystem.TostrengthentheglobalresponsetothegoalsoftheParisAgreementbyensuringthefinancialsystem鈥檚managementofriskandmobilizationofgreenfinance,eightcentralbanksandsupervisorsestablishedtheCentralBanksandSupervisorsNetworkforGreeningtheFinancialSystem(NGFS).Thenetworkhadexpandedtocover15countriesbymid-2018.TheNGFSoffersanopportunitytoscaleupandcoordinateglobalefforts.
Chinaworksdirectlywithanumberofcountriesandgroups.Forexample,ChinaisworkingwiththeEUandtheASEANonseveralareastopromotegreenfinanceontheglobalstage.WithintheBeltandRoadInitiative,Chinaworkswithrelevantcountriestoensuretheinclusionandprioritizationofgreenfinance.AnotherexampleisChinaUKcooperationongreenfinance,whichhasbeencarriedoutoverthelastthreeyearsandwillcontinueinthefutureundertheframeworkoftheChina-UKEconomicandFinancialDialogue.ChinaalsoworkswithFranceinparticulartoestablishParisasaEuropeanleaderingreenfinance.
Chinaalsoactivelyengagesinglobalforumsongreenfinance.TheseincludeanumberofavenuesundertheUNsystemsuchasCOPnegotiationsoftheUNFCCC.Fromaresearchperspective,ChinaalsoworkswithinternationalorganizationssuchasUNEPFIandUNPRI.BasedonareportreleasedbytheFinancialStabilityBoard鈥檚TaskForceonClimateRelatedFinancialDisclosure,ChinaiscarryingoutpilotprogramswhilecoordinatingeffortswiththeUKwhichisrunningsimilarpilotprograms.Theseprogramswillshaperecommendationsonhowclimatefinanceshouldbecarriedoutgloballyinthefuture.Suchcombinedeffortshavegreatimplicationsforexpandingandharmonizinggreenfinanceatthegloballevel.
China鈥檚overseasgreeninvestmentisontherise,throughbothsovereignandnon-sovereignbackedchannels.Chinahascreatedorco-created15fundsworthalmostUS$150billion.ThesefundsprimarilyinvolvedevelopingcountriesinAfricaandLatinAmerica,countriesalongtheBeltandRoadroutesandASEANcountries.鈥楪reen鈥檌samongtheprimarytopicsforinvestmentofthesefunds,twoofwhicharespecificallygreen-themedfunds,namelytheSouth-SouthClimateCooperationFundandtheU.S.-ChinaGreenFund.
Dr.WangYaoisdirector-generaloftheInternationalInstituteofGreenFinance(IIGF)attheCentralUniversityofFinanceandEconomics(CUFE)anddeputysecretarygeneraloftheGreenFinanceCommitteeofChinaSocietyofFinanceandBanking.MathiasLundLarsenisheadoftheInternationalCooperationDepartmentofIIGF.