Green investment prioritized in Belt and Road cooperation

China is reinforcing cooperation on environment-friendly investment and green financing with financial institutions from multiple countries and regions, in an effort to curb carbon emission generated from infrastructure construction, and secure low-carbon and sustainable growth of countries along the Belt and Road.

A Silk Road-themed rally for natural gas vehicles (NGVs) commenced in Rudong, east China’s Jiangsu province on September 4, 2018. It was an event jointly organized by the largest energy companies in China, Russia and Kazakhstan as an active response to the Belt and Road Initiative. It aimed to strengthen cooperation of natural gas terminal utilization among the three countries. All the vehicles participating in the event were powered by liquefied natural gas, setting an example of clean energy consumption for the road transportation along the Silk Road Economic Belt. During the event, the capability of NGVs to cross the Eurasia transport corridor was also assessed. (Photo by People’s Daily Online)

The Global Infrastructure Hub (GIH) predicted that by 2040, most of the investment demands on infrastructure would come from developing countries, especially the Belt and Road countries.

Under such circumstances, China and its partners are now devoting to establishing a network for green investors under the Belt and Road framework, and offer more support for green industries.

Last November, a set of green finance guidelines for the Belt and Road Initiative (BRI) was jointly issued by China’s Green Finance Committee (GFC) and the City of London Corporation, and has been greeted by a number of global financial institutes since then.

By mid-March this year, nearly 20 commercial banks, stock exchanges and industrial associations from the UK, France, Singapore and Pakistan have signed up to the principles. Many multilateral development banks, consulting firms and accounting firms also voiced their support.

The principles incorporate low-carbon and sustainable development into the BRI, with an aim to enhance environmental and social risk management and encourage green investment under the Belt and Road framework.

The Green Investment Principles include seven fundamental philosophies in corporate governance, strategy-making, project management, communication with stakeholders, and the application of green financial instruments, covering three different levels from strategy to operation and innovation.

Global financial organizations and enterprises participating in the Belt and Road construction and investment are welcomed to adopt and implement these proposals on voluntary basis.

“Green, low-carbon and sustainable development is an inherent nature of the BRI, and to achieve this goal needs greener investments,” said an official from the GFC.

The construction and operation of infrastructure and buildings release massive greenhouse gases, the official noted, adding that the global pressure of climate change will be effectively alleviated if environment and sustainability are given more weight in this process.

The GIH estimates that the world will need $94 trillion on infrastructure in 2040, most of which will come from developing countries, especially BRI participants.

In addition, many Belt and Road countries and regions are still relying on extensive economic growth and suffering from severe air and water pollution, posing serious challenges for their sustainable development.

“To reverse the situation, we need not only effective measures of environmental treatment, but also green financing instruments that change the incentive mechanism of resource allocation from the start of financing and investment, and make investment decision and implementation environment-oriented,” said the GFC official.

Green finance will guarantee more capital flow into the green industries, as well as strict control of high-pollution and high-carbon investment, he added.

To be specific, projects’ possible impacts on local ecosystem, environment and climate must be taken into full consideration before investment decisions are made. Effective measures must be taken to reduce pollution, control greenhouse gas emission and protect biodiversity.

In addition, environmental risk analysis and green finance tools, such as green credit and loan, green bonds and insurance, should be given full play to facilitate green development, prevent the potential risks of environmental and climate factors, and improve return on investment.

China will stay open and give full play to its role as an international finance center, and attract more international capital to join the Belt and Road construction in a green and sustainable manner.

The initiators of the Green Investment Principles will establish a secretariat that offers services for the signatories, including a base for green projects under the Belt and Road framework, a carbon emission calculator for development and investment projects, and a knowledge sharing platform.

Ma Jun, director of the GFC said that more financial institutes and enterprises are welcomed to support and sign the principles.

A network for green investors will be set up by the secretariat to bolster their communication, improve risk control capability of member organizations, and create cooperation opportunities of green investment for member institutions, Ma vowed.