Green Finance stands for the responsibility of the financial sector to support the reduction of GHG emissions and the creation of a climate resilient economy. Green municipal finance (GMF) is crosscutting through a number of green finance topics, such as green banking and financial instruments
EC-Link project wants to support Chinese municipalities in developing, among the others, their infrastructures in a way to develop green sustainable projects and to increase the awareness of the existing business opportunities for the private sector.
Local governments are expected to accelerate bond issuance next year, to raise more funds for infrastructure construction projects and stabilize economic growth, according to analysts.
The country's top legislators will deliberate a proposal for assigning part of the 2019 bond issuance quota to local governments, during a seven-day meeting starting from Dec 23, 2018, according to a statement on the National People's Congress website.
That means local governments could issue new bonds starting from January, much earlier than May as usual, to accelerate fundraising and support government-led infrastructure construction.
Source: China Daily
The European Commission this year unveiled its framework for research and innovation spending, envisioning spending 100 billion euros from 2021 to 2027 with greater emphasis on entrepreneurship and innovation.
The investment plan is open to the world and especially to China, as it is in line with China's next five-year plan, according to EU official.
EC-Link Project organized the Second Network Meeting in order to provide an introduction of New Rules for China's Capital Markets: taking the ADB Shandong Fund as an example of a blended facility for Green Investment.
Participants highlighted the fact that it is still difficult to define Green vs. Not Green, and this creates a lot of difficulties in the selection of appropriate projects both at national and local levels. Moreover, there is no alignment between China and International Institutions in the definition of “Green”. Moreover, it was raised the issue of a missing communication between financial institutions and local governments. Further, there is no clear mapping of on-going green finance projects. It’s important to create an efficient database so to have a clear understanding of present activities so to identify a priority pipeline of profitable projects (both from financial and technical point of view) to be presented to national and international institutions.
EC-LINK Project is doing city-level cooperation and communication work in China and providing green finance assistance. It will continue its work in order to sustain an effective dialogue between Chinese Municipalities and main Chinese and International Banks and Funds.
On November 15, 2018, the “International Forum of Financing Sustainable Buildings” took place in Chongqing. The event welcomed 150 attendees and was hosted by the Wuppertal Institute for Climate, Environment and Energy. The GIZ Sino-German Urbanization Partnership (SGUP) was excited to co-organize the event. As an organisation which was initiated by the aims to foster collaboration between Chinese and German parties on sustainable urbanisation objectives, SGUP believes that effective solutions can only be found by involving all stakeholders in the discussion. This scheme is overseen by the Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU) of the Federal Republic of Germany and the Ministry of Housing and Urban-Rural Development (MoHURD) of the People’s Republic of China
In the last decade, the Chinese government has implemented multiple policies to promote sustainable buildings. Public financing particularly provides a major incentive for various actors to improve the potential of energy efficiency and green building. However, it is evident that subsidies alone cannot achieve China’s sustainable building initiative. Green financing channels and tools are also essential for attracting private investment to further fill the immense financial gaps. At the same time, green financing is becoming increasingly popular worldwide among both financial institutions and policymakers. Therefore, although the area of green financing has developed rapidly in China, the general building sector seems to have received far less attention than other sectors.
Data developed by Shi Yichen, the Dean of International Institute of Green Finance, Central University of Finance and Economics, presents further insights into China’s green finance situation. According to Shi, as of June 2017, the green credit balance of 21 major banks in China reached RMB 8.2 trillion (approximately EUR 1 trillion) . This indicates a year-on-year increase of 12.9%, accounting for 10% of the budget of various loans. Industrial financial institutions have developed policies to support green credit and established 50 categories of green credit. Shi offers a comprehensive explanation of green building investment and financing. According to him, the term should take into account a wide range of factors: impacts on social and economic resources, green technology and energy-saving of buildings and the potential benefits and risks of capital in investment and financing. He similarly states that ecological aspects of the building’s life cycle should be considered in financial accounting and decision-making. Similarly, economic behavior in the construction sector should also take a multi-disciplinary approach by recognizing environmental, social and economic issues in order to enhance the sector’s sustainable development.
The forum brought key players from China, Europe and international financial institutions together to discuss the challenges that green financing faces in supporting China's sustainable building development. These actors also highlighted opportunities for collaboration and potential solutions to the recognised challenges.
In his presentation, Professor Ding Yong of Chongqing University shed light on the relevant required technology as well as a cost-benefit analysis of energy-saving renovation of existing public buildings in Chongqing. According to his research, investment for renovating both school and office buildings in Chongqing remains low, but the investment recovery period is the highest when financial subsidies are not considered. It is believed that these two types of buildings do not attract high investment because of they are actively used for relatively brief periods. For example, school buildings are closed for vacation during the summer – a season when other buildings are at their peak of using air-conditioners. Therefore, school buildings save less energy through their air conditioning systems than other types of buildings each year, so the investment recovery period is longer than in other types of buildings. This indicates that school buildings have a large demand for financial subsidies. Nonetheless, after the renovation, the average energy consumption of each type of building decreased significantly, with a drop of roughly 24%.
About SWITCH ASIA-II – Promoting Sustainable Building Mainstreaming in Western China
- To further sustainable building practices in less developed regions of western China;
- To reduce climate and resource impacts of the building sector and to contribute to sustainable socio-economic growth in China.
- To foster sustainable building practices among Micro, Small and Medium Entreprises (MSME)s in Chongqing City and Yunnan province and further promote these practices in western China over 2016 to 2019.
China’s unprecedented socio-economic growth has triggered a vast expansion of the country’s building sector. As a result, since 1990, the energy consumption of buildings has increased by 40%. Furthermore, China’s building sector accounts for almost 30% of the country’s final energy consumption. Hence, enhancing energy-saving practices in the building sector represents a critical way to fulfil China’s ambitions of developing a resource efficient and low carbon pathway. In fact, the Chinese government aims that 50% of the country’s new constructions will meet green building standards by 2020. At present, it is estimated that only 10% of new construction projects currently reach this standard. Out of these mentioned 10% of construction projects, a large majority (about 90%) are located in the more developed eastern part of China. In contrast, the expansion of sustainable buildings in western parts of the country, such as Chongqing and Yunnan Province, remains still in the early stages.
The Project Consortium:
- Environment and Energy (WI)
- China Association of Building Energy Efficiency (CABEE)
- Chongqing Association of Building Energy Efficiency (CQBEEA)
- Yunnan Development Centre for Building Technology (YNBTDC)
- Beijing University of Civil Engineering and Architecture (BUCEA)
- Yunnan Engineering Quality Supervision Management Centre (YNEQS)
- Chongqing Economic Promotional Centre for Building Material Industry (CEPCBM)
- Bank of Chongqing (BOC)
- Ministry of Housing and Urban & Rural Development (MoHURD)
- Yunnan Provincial Agency of Housing and Urban & Rural Development (YNHURD)
- Chongqing Municipal Agency of Housing and Urban & Rural Development
- Chongqing Banking Association (CQBA)
- Yunnan Banking Association (YNBA)
- Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH
- econet china I Germany Industry & Commerce Greater China
EC-Link has received an increasing recognition by Chinese cities providing useful support to their efforts towards sustainable development.
Based on Project’s on-going activities within Municipal Green Finance sector, on September 26, 2018, EC-Link initiated the China Urban Green Finance Network in an official meeting held in European Embassy at the presence of Mr. Jerome Pons, Head of the Head of Development and Cooperation Section in European Union; 45 participantsfrom over 30 financial institutions joined, including World Bank, AsianDevelopment Banks, AFD, KfW, ICBC, ABC, Jiangsu Bank and Industrial Bank etc.
Mr. Pons gave his warm congratulations to the establishment of CUGFN andexpressed his expectations to the great potential of network cooperation facingthe Sino-Europe green city development.
The attendants exchanged opinions on challenges and (increasing) opportunities of green municipal financing in urban projects while pursuing the namely Ecological Civilization in China.
During the meeting, it was highlighted the fact that it is still difficult to define Green vs. Not Green, and this creates a lot of difficulties in the selection of appropriate projects both at national and local levels. Moreover, there is no alignment between Chinese and International Institutions in the definition of “Green”.
Green Finance for the development of green projects needs a common vision among Chinese ministries, especially MoF and MEE; but in many cases such alignment is not present and local governments have difficulties in properly selecting green projects at local level.
CUGFN is composed by a stable group of work (composed from European and Chinese banks, international funds, think tanks, etc.) meant to sustain the development of research, events and projects within green municipal finance segment. EC-Link will coordinate financial institutions and donor agencies so to joint forces and leverages multiple resources both from international agencies as well as the Chinese institutions.
EC-Link is supporting Chinese municipalities in investigating and recommending sustainable funding mechanisms, particularly in relation to their capacity to fund green investments designed to implement climate policies and green projects.
The China Urban Green Financing Forum was held on July 5th by the Europe-China Eco Cities Link project (EC Link) in cooperation with the Cities Development Initiative for Asia (CDIA) to establish a network of cities, expertise and financing institutions in implementing green investments collaboratively.
The forum was supported by the Delegation of the European Union to China and the Department of Building Energy-Saving and Technology at the Ministry of Housing and Urban-Rural Development (MoHURD). It envisaged the network will help MoHURD and Chinese cities in promoting innovation in green finance products and structuring tools, the popularization of green finance and sustainable solutions for low-carbon urban financing.
“Moving to a green economy is now a central and strategic priority for both China and the EU”, said Chris Wood, Minister and Deputy Head of the European Union Delegation to China. "Cities have a key role to play in the transition towards a low carbon, resource-efficient and sustainable future. However, cities will require financial means to achieve these."
“Green finance and market-based mechanisms are both strategic and innovative tools to improve the complementarity of public and private resource allocation and contribute to the development of low carbon industries. The EU has been supporting cities in strengthening the potential to lead the low-carbon transition through better regulation, better funding and better knowledge sharing via various initiatives. As our long-standing partner, China will retain its crucial role, and the EU is committed to working with China towards a common green future”, Wood added.
China has committed as part of the Paris Agreement to bring carbon emissions to a plateau in or around 2030. Pushing ahead with urbanization, China expects to see more than one billion people - accounting for more than 70 percent of the country’s population - reside in cities by 2030, making the country home to the world’s largest urban population.
In order to keep to the its carbon commitment, green and low-carbon urban planning and policies will be essential. Cities, which contribute 70 percent of China’s total energy-related carbon emissions, present the greatest opportunity for meeting national and global climate targets, as well as the country’s long-term development strategy.
Director General Su Yunshan from MoHURD said that green financing plays a decisive role in promoting cities' green development in particular in sectors of green transport, green building, clean energy, etc. “Promoting urban green financing relies on collaborative coordination among all departments under an effective and solid mechanism, and financing institutions should proactively explore new products and new cooperation based on cities' real needs”, said DG Su who recognized the importance of EC-LINK in helping cities address new challenges in the rapid urbanization process.
Around 200 officials, professionals and entrepreneurs from the urban planning, environmental and financing sectors attended the forum, bringing deeper insights into urban green development issues and innovative sustainable green financing solutions and policies. A number of internationally leading financing institutions and cities initiatives introduced their respective green financing tools and projects, with focus on how to develop and apply bankable projects in the Chinese cities 'context.
The EC-Link project is a key component of the EU-China Partnership on Sustainable Urbanization, launched in November 2013 with the aim of assisting Chinese cities in implementing energy and resource-efficient measures by sharing experiences in sustainable urbanization with cities in Europe.
EC-Link Project was invited to participate to the UN Science-Policy-Business Forum on the Environment held in New York on May 1-4, 2018.The UN Forum was framed around the following key streams:
- Technology and innovation as game changers;
- Innovative policies required to grow green technology markets;
- Markets and Finance: Sustainable Finance, sustainable CSR and innovative Public-Private Partnerships for the Environment.
EC-Link made anintervention related to “Growing Green Technology Markets - Lessons from China”; indeed the presentation receivedgreat attention due to the interest that foreign stakeholders are giving to China and in particular to the internal (but not only) development of green finance and municipal green finance.
Moreover, EC-Link was able to promote on-going activities in particular regarding Municipal Green Financing Sector and to verify the possibility to develop future cooperation with stakeholders present at the Forum.
Move makes china the first country to build a national system to boost green finance. As China strives to protect its ecological integrity, the financial sector is coming to the aid to contain pollution and help advance the industrial transformation.Green finance－a concept still unfamiliar to most－entered the economic lexicon last week after the central government decided to set up five pilot zones nationwide.The State Council, China's Cabinet, arrived at the decision at an executive meeting, which was presided over by Premier Li Keqiang on June 14. Financial institutions will further enhance their shoring-up for environmental protection projects and industrial upgrading with favorable policies on interest payments and loans.The pilot zones will be set up in Zhejiang, Jiangxi, Guangdong, Guizhou provinces and the Xinjiang Uygur autonomous region, according to a statement released after the meeting.Systematical innovation for green finance will increase the financial sector's support to improve ecology and boost the efficient utilization of resources. The statement said the pilot zones are also an important way to continue China's commitment to the Paris climate accord after US President Donald Trump announced the US would withdraw from the agreement early this month.
The statement said the government will support financial institutions to set up green finance departments and welcome foreign capital to participate in green investments. The development of "green credit" will be encouraged to take the environmental credentials of companies into account. The country will start pilot markets for trading rights of resources such as water and energy. The central government will provide support in fiscal, tax and land policies for green industries and projects, while a risk prevention mechanism will be established.
Green finance was first proposed in the Government Work Report delivered by Li in March 2016. The term, reiterated by the premier in this year's work report, was first officially defined in a guideline co-released by the National Development and Reform Commission and another six ministries in August. By definition, it means financial services that help increase investment and financing, project operations and risk management in fields such as environmental protection, energy conservation, clean energy, green transport and buildings.
The guideline made China the first country where the central government boosts green finance nationwide by building a national system, Chen Yulu, vice-governor of the People's Bank of China, the central bank, said during a policy briefing on Friday.
"The necessity to establish such pilot zones cannot be overestimated as the decision was the first concrete measure to implement the guideline," said Wang Yao, president of the International Institute of Green Finance at the Central University of Finance and Economics.
The pilot zones have already industrialized, or are undergoing industrial upgrading, or are in far-flung and less-developed regions, Wang said. Experience and lessons can be absorbed from different conditions, which can easily adapt to other regions, he added.
"We still lack experience in the new green finance, which demands pilot reforms to find replicable practices in wider regions," the premier told the State Council meeting.
Chen said each of the pilot regions had different conditions. Zhejiang and Guangdong have developed economies and financial sectors, but are eager to upgrade their current development models. How to integrate the financial market with industrial upgrading will be a key for the two provinces, he said. For example, the city of Huzhou in Zhejiang is already one of the country's five cities which have compiled a "balance sheet" of natural resources. Quzhou city has carried out a pioneering project for green credits, green bonds and industrial funds, Chen said. These advantages will facilitate the establishment of new pilot zones, he added. In comparison, Guizhou and Jiangxi are less-developed economically, but possess rich resources for green industries. The two provinces are set to boost green finance on their way to a less-polluting model for economic growth, which will focus on modern agriculture, rural drainage systems and energy conservation. Nevertheless, Xinjiang is an important gateway of the Belt and Road Initiative and will lay more emphasis on fields such as clean energy and high-end manufacturing, including solar power equipment, Chen said.
Lu Zhengwei, chief economist of the Industrial Bank Co Ltd, said each of the five regions has its own conditions while building a green finance system. By carrying out the project, China's green finance will proceed more easily with lessons learnt, he said.
By Hu Yongqi | sources: China Daily | Updated: 2017-06-20 07:45
On December 12, global heads of state, mayors and business leaders gathered in Paris to celebrate the second anniversary of the Paris Climate Agreement. The One Planet Summit featured a range of high profile announcements on climate finance from governments, banks, business, and investors.
The United States is the only country not to have accepted the Paris Agreement so President Trump was reportedly not invited. But the summit shows that Trump’s position has not dampened global climate action. With the risks of climate change rising on the global agenda, momentum continues to build in finance and business, as well as by governments.
Shifting from coal to clean
One of the headline announcements was from the World Bank Group, which will stop investing in upstream oil and gas from 2019. This matters because according to recent data, it continued to spend on oil and gas after the Paris deal, investing around a billion dollars in fossil fuel exploration in 2016.
Momentum to phase out coal was also given a boost. The “Powering Past Coal” alliance led by the UK and Canada added Sweden and California to its membership, plus 24 new businesses. However, a major test will be whether it can sign up an emerging economy in Asia where much new coal investment is located.
In another major announcement, the 23 largest national and regional development banks agreed to align their finance with the Paris Agreement. The International Development Finance Club represents over 69 countries and holds assets of more than US$4 trillion (26.5 trillion yuan). Its largest member is China Development Bank, which had US 130 billion (860 billion yuan) of commitments in 2015.
Ensuring that finance from large public banks is in line with Paris is essential because public institutions can help to boost private investment in sustainable projects by reducing risks. For example, the State Bank of India highlighted a new partnership with the World Bank to provide new lines of credit for rooftop solar energy, which should encourage more investment in the sector.
The World Bank also announced it will apply a shadow carbon price on all projects in high-emitting sectors to take account of pollution costs. Former US Secretary of State John Kerry described pricing carbon as the “single biggest thing we can do” on climate change.
China was also in the spotlight at the summit. Top green finance official Ma Jun said that by 2020 “every listed company in China must disclose information on environmental impacts”. China may have a third of the world’s installed clean energy capacity, but the climate impacts of its overseas investments through its Belt and Road Initiative are causing concern. Ma Jun acknowledged that emissions from the Belt and Road “could be three times China’s emissions” if nothing is done.
Private sector actions
There were numerous pledges from the private sector on pulling funding out of fossil fuels. French insurance giant AXA will phase out insurance for new coal construction projects and Dutch Bank ING will end coal lending by 2025.
Global investors also launched the five-year Climate Action 100+ to curb their emissions. Impressively, investors with more than US$26.3 trillion (174 trillion yuan) in assets have signed up.
2017 has been a year of green finance opportunities, with global issuance on green bonds reaching US$100 billion (662 billion yuan) and HSBC recently launching the world’s first US 1 billion sustainable development bond (6.62 billion yuan).
Bank of England governor Mark Carney, revealed more than 230 companies have committed to the Task Force on Climate-related Financial Disclosures, representing a market capitalisation of over US$6.3 trillion (41.7 billion yuan). The Task Force recommends companies reveal information about harmful investment, which Carney said is now “entering the mainstream”.
Japan’s pension fund GPIF, the largest pension fund in the world, announced a “science based target” to reduce greenhouse gas emissions. Japan is aiming for 100 companies to have such a target by 2020, ensuring a reduction in fossil investments.
Opportunities for cities
The new initiatives pose opportunities for Asia’s fast-growing cities. Signatories of the Global Covenant of Mayors, which include 34 cities in East and South Asia, represent more than 10% of the world’s population. This group announced a new climate partnership with the World Bank to invest US$4.5 billion (30 billion yuan) in 150 cities around the world. The European Bank for Reconstruction and Development will also invest heavily in cities following the launch of its Green Cities Climate Finance Accelerator.
With unprecedented hurricanes devastating several Caribbean islands this year, their leaders will now create the world’s first “climate smart zone” to implement an ambitious US$8 billion (53 billion yuan) plan, including 100% renewable energy. And thinking long term, Costa Ricam, Ethippia, Germany and Sweden were among 14 countries promising to develop plans to be carbon neutral by 2050.
Finally, China is expected to launch its emission trading scheme soon. As the world’s leading energy financer, China is pivotal to achieving the Paris Agreement. After these high-profile announcements by development banks, investors and insurers, attention will now turn to China and its efforts to green both its financial system and overseas investments.
source: The Paris Agreement’s second anniversary was met with numerous commitments on green finance, writes Helena Wright