China shares pioneering environmental finance experience with the world

Experts from around the world attended the 2017 International Green Finance Forum in Beijing Tuesday, at which they discussed how to make green finance mainstream around the globe to help deal with climate change.

The forum was co-sponsored, among others, by the Green Finance Committee (GFC) of the China Society for Finance and Banking, the United Nations Environment Program and many Chinese financial enterprises and organizations were in attendance.

Yin Yong, deputy governor of the People’s Bank of China, the central bank, said at the forum that China is the first country to establish a “relatively complete” green finance policy and system and that China will further promote international cooperation in green finance.

China’s 13th Five-year Plan (201620) emphasizes the establishment of

a green financial system, the Xinhua News Agency reported in August 2016.

Green finance refers to any financial instrument or investment that is used in exchange for the delivery of positive environmental outcomes.

Achievements

China has done a lot to promote green finance, including initiating the establishment of the G20 Green Finance Study Group, which was recognized by the heads of state at the G20 summit held in Hangzhou last year, said Yin at the forum.

The G20 Green Finance Study Group aims to recognize the systemic and market barriers in green finance development, come up with measures to establish and optimize the green financial system and to increase the private sector’s investment capacity, according to the Xinhua report.

Deborah Lehr, Vice Chairman of the Paulson Institute and a key speaker at the forum, told the Global Times in an exclusive interview on Wednesday that the G20 Green Finance Study Group has helped elevate on green finance.

“China has issued national regulations and an important circular from the financial departments outlining an ambitious green finance agenda, including green lending standards, indices and insurance.” said Lehr, adding that China’s green bond market is growing extremely rapidly.

A united carbon market in China will be launched soon, China Economic Herald reported on September 1.

China will further promote international cooperation on green finance, especially with “Belt and Road” countries, Yin said at the forum.

“When China launches its national carbon market it will likely be the largest in the world. As China expands the ability to trade on that market globally, it may set the standard of the development for carbon market.” said Lehr.

Unlike China, the US administration currently places emphasis on both protecting traditional energy industries and growing new technologies, Lehr said. Promoting a vibrant green finance infrastructure requires proactive government policy combined with incentives to change behavior. In China, the government has taken a very active role, she added.

Challenges

Chen Yulu, deputy governor of the People’s Bank of China, said Monday that China’s green finance has entered a stage of “full acceleration,” the Economic Daily reported. However, there are still some challenges confronting green finance in both China and US.

Lehr said that challenges lie in the establishment of carbon trading system in terms of data collection, futures trading, balancing the regulatory framework and policy coordination.

“A major difference in the challenges confronting US and China is that the Chinese government has worked out a very active plan for developing a sophisticated green finance market. In contrast, the US government prefers to let the markets work but also, under the Trump administration, there has been a turn away from supporting green finance efforts.” said Lehr.

Another problem is that there is no internationally accepted definition of “green,” according to Lehr.

“A wind farm could be green and a cement factory may be brown, but how you define the projects in between is very difficult until there could be a definition of ‘green’ and a robust index to be able to rate the financial products. The financial architecture is still not very sophisticated for the development of the private equity market in green finance.” said Lehr.

Ma Jun, director of the GFC, said that there is a lack of uniform standards in the green bond market, which requires a unification of the market and the authentication system, the China Securities Journal reported

in March.