Green Finance in China

Here’s your weekly update on green finance in China from the International Institute of Green Finance in Beijing with a belt and road forum recap, a report review, and green finance in the countryside. 10th of May 2019.

 

(a reader suggested that we left align the text, I disagreed, boss agreed, so now it's left aligned)

一, BRI forum recap

Your last issue was published in the midst of the Second Belt and Road Forum. Two weeks later the dust have settled and the overall summary of reactions is still fairly positive. Politicians and analysts like what they heard in Beijing with regards to transparency and environmental issues. Sceptics, however, say they’ve heard it all before and they want action beyond mere words.

 

To assist us in reaching our own conclusions the good people of Greenpeace have concocted a list of deals done at the forum. It features a lot of energy and transportation (the pillars of the initiative). The energy is primarily coal and a bit of hydropower, and you have to look far for renewable projects (click the Twitter link, download, and read for full view).

 

Beijing touted 283 concrete projects in six different categories as the result of the meeting, some of these were previous deals in new wrapping and few are green finance related. The ICBC bank did issue its first BRBR interbank bond, an effort that earned it a listing among the 283 projects.

 

Center for Strategic and International Studies, CSIS, has a good summary of the forum from a green perspective with a tip of the hat to the signing of the GIP (Green Investment Principles) that we mentioned in our last edition:

 

“Cognizant of the reputational toll from high emission energy financing, the Chinese government highlighted a few initiatives that seem to emphasize its commitment to greening BRI during the second forum. For example, the Green Investment Principles (GIP), which aim to build an international network to improve the management of environmental and social risks for investing in the BRI regions…”

 

but at the end the author, Jane Nakano, is as cautious as everyone else in concluding on the green results in the BRI:

 

“The BRI has a great potential to become a force for the global clean energy transition underway. Beijing has now had several chances to take its green intentions and turn them into action. Making good on the environmental protocols and standards it has once again put forward to guide BRI investments will mean the difference between genuine greening or simply greenwashing.”

 

Last week we merely provided you with the Chinese version of Xi’s speech. We’ve included the dubbed-to-English version below.

 

21经济: 第二届“一带一路”国际合作高峰论坛成果清单,包括6大类283项

 

CSIS: Greening or greenwashing the Belt and Road Initiative?

 

Xinhua: Xi Jinping’s Speech

 

SASAC: 一带一路时间中央企业签下多项海外大单

 

Greenpeace (twitter – via Yan Wang): Investment list

 

二, belt and road mapping

What constitutes Belt and Road projects is still a matter for debate and difficult to keep taps on. The Center for Foreign Relations have built tool to give you an overview of overall Chinese trade with BRI countries as well as individual country profiles 

The tools is basic but useful and can be found here: 

 

CFR: Belt and Road Tracker

 

Merics, a German think tank, has created their own tracker with maps, blogposts and news stories:

 

Merics: Belt and Road Tracker 

三, standing committee reviews work

The Standing Committee of the National People’s Congress have been reading up on their 2018 environmental assessment report and concludes that they've done a good job.

 

“The quality of the atmosphere and the water environment was further improved, soil environmental risks were basically controlled, the ecosystem was stable overall, and the environmental risk situation remained stable,” Li Ganjie, minister of Ecology and Environment, said, according to Xinhua’s summary.

 

Among the 338 biggest cities in China, 121 meet the environmental standards set out by the government on air quality. PM2.5 concentration (everybody’s favourite measure of that) decreased by 9.3%.

 

But it’s not all smooth cleaning from here as the standing committee members are seeing marginal diminishing return on their pollution combatting efforts and thus it “will be difficult to continue to greatly improve air quality.”

 

The report also lists stats on the improvement of soil and water quality.

 

An important aspect of the improvement, and something we haven’t highlighted enough in this newsletter, is the increased surveillance and subsequent fines on violators.

 

“In 2018 186,000 “administrative punishment” cases were completed, with fines totalling 15.28 billion RMB issued, a year-on-year increase of 32%.”

 

新华网: 人大常委会审议2018年度环保报告

四, green finance in the countryside  

Agricultural Bank of China was tasked with bringing development to the green-fingered sector of the Chinese economy after reform and opening. In 1978 that meant allowing households to break away from the communes and reap what they sowed. Arguably the most important part of reform agenda.

 

Since then, the ABC has been listed on the Shanghai stock exchange and grown to be the third largest bank in China and the world. The bank has maintained it’s agricultural portfolio and green focus, and it now includes green finance: At the end of April the bank signed a Memorandum of Understanding (MoU) with the Climate Bond Initiative focusing on agricultural investments.

 

The understanding aims to

 

  • Develop green agriculture criteria that are in line with green definitions in the international market, China’s climate and environmental policies and agriculture strategy;
  • Identify potential green agriculture projects, available financing options and support mechanisms;
  • Promote and provide training on green agriculture criteria to relevant investors including Chinese SOEs, funds, banks and international investors.

 

The ABC is trailing its policy bank peers in underwriting green bonds, but bas more than doubled its effort last year.

 

CBI: CBI and ACB sign MoU

五, measures in Hong Kong

Hong Kong, the jewel of Asian finance, has been lagging behind its neighbour to the North in implementing green finance measures in its markets. But in the past six months there have been improvements.

 

On Tuesday the Hong Kong Monetary Authority (HKMA) announced new measures in “support of the mission to reduce climate change risks and to achieve sustainable finance,” Norman Chan, Chief Executive of HKMA, said.

 

The three measures with 11 sub-measures are aimed at making banking green and sustainable (a three step plan), ensuring responsible investments (via ESG among others) and establishing a Centre for Green Finance in the city that will do technical support and knowledge sharing for interested parties.

 

The initiative was launched at the Green Finance Forum.

 

HKMA press release: HKMA introduces key measures on sustainable banking and green finance 

六, hedging climate news

There is more than one way to deal financially with the issue of climate change. Green finance is the tool you use for mitigating and reversing the issue – doing good and doing well. Hedging your stock portfolio against bad news about the climate is more focused on the doing well part and it will have a positive effect on your portfolio a new paper shows. Five scientists at various US East coast universities have extracted data on climate change events, such as floods, draughts and wildfires, from news sources and then constructed equity portfolios using company ESG scores to act on those news items. The results yield this:

According to the authors their method is effective, though further research is required. And constructing the portfolio is no Sunday evening task. On page 27 they show a table which lists the industry sectors that are positively or negatively correlated with climate change news, which makes for interesting reading.

 

NBER: Hedging Climate Change News

七, pessimism v. optimism

Pessimism versus optimism. Doom versus Technology. Humans versus humanity. I have this discussion with friends, colleagues, family, strangers, and anyone else not particularly interested but non the less obligated to participate. Gideon Rachman of the FT has a written a brief and beautiful summary pitting Bill Gates in the role of the optimist against David Attenbourough in the role of the pessimist:

 

“I suspect that Mr Gates is correct to believe that technological advances can eventually solve or mitigate many of the problems caused by climate change. But I am afraid that Sir David is right to fear that these technological breakthroughs will come too late to prevent tragic damage to the natural world. The unresolved question is whether change will come fast enough to protect humanity itself.”

 

FT: Attenborough, Gates and the battle between optimism and pessimism

 八, green bonds

There were three issuances in the Chinese green bond market and eight it in the non-labeled green bond market in the period from 22nd till the 28th of April.

 

盘点绿色债券 4.22 - 4.28

This is the eleventh issue of our Green Finance in China newsletter. The idea is to bring the latest in news, research, and opinion related to green finance in China to anyone interested. Please send tips and criticisms our way. You can also have a look at greenfinanceinchina.com where we'll host earlier editions, blog posts, and more. 

 

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Published by the International Institute of Green Finance, Beijing

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