Green finance Sustainable finance is the set of financial regulations, standards, norms and products that pursue an environmental objective. It allows the financial system to connect with the economy and its populations by financing its agents while maintaining a ...

is officially promoted as an important feature of the

Belt and Road Initiative The Belt and Road Initiative (BRI, or B&R), formerly known as One Belt One Road ( zh, link=no, 一带一路) or OBOR for short, is a global infrastructure development strategy adopted by the Chinese government in 2013 to invest in nearly 150 ...

China China, officially the People's Republic of China (PRC), is a country in East Asia. It is the world's most populous country, with a population exceeding 1.4 billion, slightly ahead of India. China spans the equivalent of five time zones and ...

's signature global economic development initiative. The official vision for the BRI calls for an environmentally friendly "Green Belt and Road".

Policy

Chinese policy documents for the BRI coordinate and encourage green finance and investment. The

Ministry of Ecology and Environment The Ministry of Ecology and Environment, formerly the Ministry of Environmental Protection of the People's Republic of China, and prior to 2008 known as the State Environmental Protection Administration, is a department of the State Council of t ...

with four other ministries released the "Guidance on Promoting a Green Belt and Road" in 2017. A section of the policy document covers mobilizing capital for financing green projects using "international multilateral and bilateral cooperative institutions and funds, such as Silk Road Fund, South-South Cooperation Assistance Fund, China-ASEAN Investment Cooperation Fund, China-Central and Eastern Europe Investment Cooperation Fund, China-ASEAN Maritime Cooperation Fund, Special Fund for Asian Regional Cooperation and LMC Special Fund." Policy institutions like the

China Development Bank The China Development Bank (CDB) () is a development bank in the People's Republic of China (PRC), led by a cabinet minister at the Governor level, under the direct jurisdiction of the State Council. As one of three policy banks in China, it ...

and

Export-Import Bank of China The Export–Import Bank of China (Chexim - China Exim Bank) () is one of two Policy banks (China), institutional banks in China chartered to implement the state policies in Industrial sector, industry, foreign trade, economy, and foreign aid ...

are to play the "guiding role". The Development Research Center of the State Council and Export-Import Bank of China released a report in 2019 on green finance for the Belt and Road. The report gives recommendations and draws on lessons for China to develop Belt and Road green finance and goes into the details about "implementing the concept of green finance" by Export-Import Bank.

Forms

The various forms of green finance includes investments, lending, and insurance by Chinese state-owned financial entities and companies for renewable energy projects in host countries of the Belt and Road.

Bonds

The market for

green bonds Green bonds (also known as climate bonds) are fixed-income financial instruments ( bonds) which are used to fund projects that have positive environmental and/or climate benefits. They follow the Green Bond Principles stated by the Internationa ...

in China is the second largest in the world. In the international bond market, Chinese banks have also issued green bonds. China Development Bank in November 2017 issued the first green bond specifically for Belt and Road projects. This first green BRI bond had EUR and USD tranches of US$1.1 billion for "renewable energy, clean transportation and water resource management projects" in BRI countries. In the same month, the

Bank of China The Bank of China (BOC; ) is a Chinese majority state-owned commercial bank headquartered in Beijing and the fourth largest bank in the world. The Bank of China was founded in 1912 by the Republican government as China's central bank, repl ...

issued a green bond on the

London Stock Exchange London Stock Exchange (LSE) is a stock exchange in the City of London, England, United Kingdom. , the total market value of all companies trading on LSE was £3.9 trillion. Its current premises are situated in Paternoster Square close to St Pau ...

although not specifically for projects in the BRI.

Loans

The two primary Chinese policy banks for financing BRI projects are China Development Bank and Export Import Bank and each states support for advancing more green loans. Both banks consider green loans to mean financing projects in renewable energy or environmental protection. The Export Import Bank claimed to fulfill green obligations under the Belt and Road by supporting "a large number of projects featuring low energy consumption and high value added in areas of new energy development and utilization and the

circular economy A circular economy (also referred to as circularity and CE) is a model of production and consumption, which involves sharing, leasing, reusing, repairing, refurbishing and recycling existing materials and products as long as possible. CE aims ...

." However, out of the energy project loans advanced by both banks between 2014 and 2017 for the BRI, 18% went to coal while solar and wind accounted for 3.4% and 2.9% respectively.

Coal projects

The primary contradiction with adherence to green finance and BRI projects is the large amount of lending by Chinese banks for coal fired power plants. In contrast, Western financial institutions have limited or prohibited financing of coal fired power plants starting with the

World Bank The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Interna ...

and

European Investment Bank The European Investment Bank (EIB) is the European Union's investment bank and is owned by the EU Member States. It is one of the largest supranational lenders in the world. The EIB finances and invests both through equity and debt solutions ...

in 2013. State owned Chinese commercial banks have shown a willingness to limit coal projects. In 2017, ICBC and China Construction Bank decided to not fund the

Carmichael coal mine The Carmichael coal mine is a coal mine in Queensland, Australia which produced its first shipment of coal in December 2021. The mine has drawn criticism for its environmental impacts on the Great Barrier Reef, water usage and carbon emissions ...

after environmental protests by the Australian public. In 2021, the

International Institute of Green Finance The International Institute of Green Finance (IIGF) of the Central University of Finance and Economics (CUFE) (in Chinese: 中央财经大学绿色金融国际研究院) is a university-based research institute and an independent and non-profit t ...

reported that China didn't finance any coal projects via its Belt and Road Initiative in the first half of 2021, which is a first since 2013 when BRI was launched.

References

{{Belt and Road Initiative Economy of China Belt and Road Initiative Foreign trade of China Investment International finance Industrial ecology Natural resources Resource economics Bonds in foreign currencies Finance in China