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.
The Asian Development Bank (ADB) is calling for the continuous development of public transportation systems in the Asia-Pacific region amid the pandemic, as the impact of the health crisis will be felt for years.
During the opening session of the Asia and the Pacific Transport Forum 2020 yesterday, ADB president Masatsugu Asakawa said urban transportation in the region’s cities struggle to adapt in terms of financial sustainability and the new requirements for safety amid the pandemic.
“The pandemic has dealt the transport sector a massive blow that will be felt for years. Urban public transport is struggling to adapt, as enforced travel restrictions, coupled with reluctance to travel on crowded systems, contribute to sharply reduced demand,” said Asakawa.
The German government plans to generate up to 11 billion euros ($13 billion) for clean transportation and renewable energy projects this year by issuing so-called green bond, officials said on Monday.
The step is part of an effort to meet demand for environmentally friendly investments and follows the path already taken by other countries, including neighbouring France. Each green bond will mirror a regular debt issuance by the German government, known as "bunds", which are considered safe havens for investors.
EC-Link Project has been developing a series of research papers focusing on the Belt and Road Initiative, this one focusing towards the importance of Green Finance within BRI.
Indeed, International cooperation in frameworks like the Belt and Road Initiative (BRI) provide ample opportunities for economic growth, high returns on investments and social development. At the same time, investments for development will lead to an acceleration of pollution, greenhouse gas (GHG) emissions and loss of biodiversity if we follow current trajectories. Simply said, current policies and investment activities are insufficient to tackle the goal of having a zero-carbon society by 2050 in Europe, in China and in the BRI.
In urban areas, it is particularly the investment in the transport sector, industrialization and sustainable urbanization that have a great influence on future green growth trajectories. Therefore, in addition to policies on renewable energy, energy efficiency, clean transport, green urbanization (such as buildings) on the demand-side, policy makers have to improve policies for green domestic and cross-border finance.
To understand the current situation and potential future trajectories, this report analyzes green urban finance developments in China, Europe and BRI. It provides an overview of the green finance policy perspective, analyze developments of public and private finance and provides relevant 5 green urban finance case studies from Europe (Paris (FR), Litoměřice (CZ) and Essen (DE)) and China (Shandong, Shenzhen) among many other minor examples.
Finally, based on developed findings, 11 recommendations are drawn on how to accelerate green urban finance in the BRI.
The Belt and Road Initiative & Green Urban Finance Research Paper can be easily downloaded at:
The Asian Development Bank (ADB) has approved a $73.39 million concessional loan and grant to the Government of Maldives to develop a waste treatment facility using waste-to-energy (WTE) technology and disposal infrastructure for the Greater Malé region and neighboring outer islands.
Greater Malé and its neighboring 32 outer islands—which host 86 tourist resorts—suffer from severe environmental pollution and deteriorating livability due to inadequate collection and haphazard disposal of solid waste. Over 830 tons per day (tpd) of solid waste are generated in the area and dumped or burned at the 10-hectare dump site on Thilafushi island. Established in 1992, this dump site has no pollution control measures. The site contaminates the surrounding environment and is a public health and environmental hazard threatening fisheries and tourism.
The green and sustainable finance market has grown significantly in recent years and is still experiencing an upswing despite the Corona crisis. The European climate targets and the sustainability policy are also addressing the financial system. "Making finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development", demands the Paris Climate Agreement. The European Commission's Action Plan on Sustainable Finance aims to strengthen the role of the financial sector in achieving a functioning economy in which environmental and social policy goals are achieved. To this end, numerous standards and guidelines are provided at regulatory and organisational level.
Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment, and amending Regulation (EU) 2019/2088 (Taxonomy Regulation) entered into force on 12 July 2020. It provides the legal framework for an EU-wide uniform classification system for sustainable investments and the criteria for determining when an economic activity can be classified as environmentally sustainable. In the future, this taxonomy can also be used as a guide in the area of credit financing.
The green finance sector had been growing exponentially pre-pandemic. As of June 2019, at least $30.7trn (£23.8trn) was held in investments marked specifically as ‘sustainable’ or ‘green’ – and increase of more than one-third in three years. While the majority of businesses are decreasing their overall investments as a result of Covid-19, the social impacts of the pandemic have led to a fresh wave of interest in ESG and a growing desire to eliminate greenwashing from this space.
Similar trends were already underway with climate disclosures. The Task Force on Climate-related Financial Disclosures (TCFD) surpassed 1,000 supporting organisations in February, while CDP charted an eightfold increase in corporates requesting suppliers’ environmental data within a decade.
With the pandemic placing further pressure on corporates to disclose their climate and nature-related risks and to go beyond incremental targets and investments on low-carbon technologies, the webinar provided best-practice advice for organisations of all sizes and sectors looking to get ahead of the curve and contribute to a truly green recovery.
Private sector banks in the UK should have a central role in financing climate action and supporting a just transition to a low carbon economy. That’s according to a new report from the Grantham Research Institute at the London School of Economics.
Framed as a strategic opportunity that climate change represents for investors, the report identifies four specific reasons why banks should support the just transition. It would reinforce trust after the financial crisis; it would demonstrate leadership; it would reduce their exposure to material climate risks; and it would expand their customer base by creating demand for new services and products.
The report is not alone in its attempt to put banking and finance at the centre of a green and just transition. Similar arguments are presented by the World Bank, by the European Union, and by many national task forces on financing the transition, including the UK’s.
The adoption of the Taxonomy Regulation by the last EP Plenary in June marks the final step of the legislative process for creating the world’s first green classification of sustainable economic activities.
By re-orienting private sector investments to green technologies and businesses, this piece of legislation will serve as guidance for the EU to reach the climate neutrality by 2050.
This should happen with the help of delegated acts containing specific technical criteria to supplement the principles set out in the Regulation. Expected by the end of this year, these new criteria will profile which technologies will be worthy a sustainable-proofed future. And this is where a simple detail hides major technical difficulties.
The ongoing economic recession due to coronavirus pandemic has created opportunities for countries to replace the standard growth path with the green growth. There is a renewed effort in many developed and developing countries to adopt a green recovery path in the backdrop of economic recession due to Covid-19. This is about reviving the economy through investment on green technology which will not degrade the environment and exhaust natural resources, but will create jobs. The pattern of growth will rely on investment in the environment as a major driver of economic development. This is opposed to the currently followed growth pattern that destroys environmental resources and emits carbon dioxide (CO2).
Governments, central banks and financial institutions each have a role to play in ensuring that massive stimulus packages rolled out to revive Covid 19-stricken economies are channeled into green projects, said finance and responsible investing experts.
Because the carbon and environmental footprint of many investments, especially infrastructure projects, will be locked in for the next few decades, it is important they are designed to be low-carbon from the start, said Dr Ma Jun, director of Tsinghua University’s research centre for green finance development in China.
In a keynote address at the recent United Nations Virtual Forum on Responsible Business and Human Rights, Ma noted that a significant amount of government spending is to stimulate consumption—dishing out coupons to consumers to spend on goods and services, for instance.
The World Bank’s Board of Executive Directors approved a loan of $200 million to China for the Jiangxi Eco-industrial Parks Project, which will strengthen Jiangxi Province’s institutional and regulatory framework for eco-industrial parks.
This move will enable the regulation to be in line with international standards and helping to reduce the country’s pollution and greenhouse gas (GHG) emissions. China’s industrial sector is responsible for around 70% of environmental pollution and 72% of greenhouse gas (GHG) emissions in the country.
As most industrial production takes place within industrial parks, these parks are thought to account for the majority of total resource use, pollution, and waste in the country. China has made the promotion of green industrial parks a central aspect of its strategy to green industries.
Establishing clear European “green” criteria for investors is key to raising more public and private funding so that the EU can become carbon neutral by 2050 as set out in the European Green Deal as well as to prevent ‘greenwashing’.
The Commission estimates that Europe needs around €260 billion per year in extra investment to achieve its 2030 climate and energy targets. In a resolution (15.05.2020), MEPs also called for investments under the COVID-19 recovery plan to be prioritised as part of the Green Deal.
“The taxonomy for sustainable investment is probably the most important development for finance since accounting. It will be a game changer in the fight against climate change”, said lead negotiator for the Environment Committee, Sirpa Pietikainen (EPP, FI). “Greening the financial sector is a first step towards making investments serve the transition to a carbon-neutral economy”, she added.
While green bonds are not immune from the broader capital markets disruptions resulting from the Covid-19 pandemic, the fundamental drivers for long-term growth of the market remain in place.
As the green bond market continues to develop, solar energy industry participants can benefit from a synergy between green bond investor demand and inherent industry characteristics, such as a desire to support investment and growth in renewable resources and reduce CO2 emissions. Potential solar energy participants in the green bond market should understand green bond basics, as well as industry-specific benefits.
The European Investment Bank (EIB) will invest €11 million to improve wastewater management and provide affordable access to water and wastewater services for more than 90 000 people in the municipality of Gjilan/Gnjilane in Kosovo. Investment from the EU bank will enable construction of a wastewater treatment plant and related sewerage network, and the revitalisation of key infrastructure in the environmental protection sector.
The investment will reduce the pollution of local water, including the risk of trans-border water contamination. New sanitary infrastructure will also improve the quality and efficiency of public health and increase municipal resilience to natural disasters such as COVID-19. The investment comes under the EIB’s Economic Resilience Initiative, which aims to improve vital infrastructure in the Western Balkans and foster social and economic progress in the region. Supporting critical environmental infrastructure is a key part of the EU and EIB strategy for the Western Balkans.
Talk has already turned to how we’ll deal with the almighty economic blowback impending from the Covid-19 pandemic. The nearest parallel is the financial crisis of 2008 – a story of unregulated market failure that here in the UK the Conservative government somehow succeeded in turning into a story of state failure in the form of the allegedly spendthrift Labour government preceding them. This enabled it to follow low-spending, deficit-cutting austerity policies that, it’s widely acknowledged, only prolonged the economic pain – though it did have the desired effect from the government’s perspective of most hurting the people it cared least about, and generally weakening public institutions to which it was ideologically opposed.
Green financing in Latin America will advance even after the COVID-19 pandemic, but the shape of those advances and how they will mitigate the effects of climate change will depend on how economies recover.
“Climate risks depend on a long-term trajectory. What will determine how the financial risk linked to climate change evolves will be how countries decide to exit the economic crisis; if they choose to invest in activities supporting a transition to a low-carbon economy or not,” Elizabeth Aceituno, the WWF’s finance specialist told BNamericas during a webinar hosted by the organization.
Meanwhile, Carolina López, representative in Chile for the UN Environment Programme Finance Initiative, said the region has made important advances in recent years in creating green finance mechanisms.
The need for a significant stimulus to prevent a protracted economic downturn arrives at a time when voices calling for increased investment to tackle climate change are also on the rise. Rather than being at odds, the two challenges can be addressed simultaneously, with coordinated planning around a Green New Deal that tackles short-term economic needs with long-term sustainability goals.
Discussions of a Green New Deal—extensive government spending and public works to decarbonise the economy while addressing key social and economic concerns around the transition—were already gaining momentum prior to the Covid-19 pandemic. At the end of 2019, the European Commission proposed a ‘Green Deal’ – a framework of regulation and legislation to achieve the EU’s targets of net-zero carbon emissions by 2050, and a 50%-55% cut in emissions from 1990 levels by 2030.
The taxonomy for sustainable investments is a classification system intended for determining what economic activities should be considered in line with sustainable development principles. It is based on six objectives: climate mitigation, climate adaption, protection of water and marine resources, circular economy, pollution, and biodiversity. To be classified as sustainable, an activity must substantially contribute to achieving at least one of the objectives, while not doing any significant harm in achieving the others. There is also a requirement of exceeding a minimum level concerning corporate social responsibility.
The commission gathered a technical expert group and tasked it with defining limits for when different activities should be considered contributing substantially, and when they should be considered as doing significant harm. These limits are referred to as screening criteria. They cover a range of activities from agriculture through energy production to transport. The expert group has presented a proposal which is generally thorough and solid. However, the suggested emission limits for the main source of carbon dioxide, the energy sector, are surprising.
As banks and other publicly traded companies face pressure to demonstrate the measures, they are taking to address climate change, green bonds are gaining popularity among issuers and investors in the Asia-Pacific region, in part because of their defensive tilt, according to investment managers.
Green bonds – fixed income products designed to fund projects that are positive for the environment – held up better than investment-grade corporate credit during the recent sell-off in the financial markets as the coronavirus pandemic weighed on the global economic outlook, according to Thomas Wacker, head of credit in UBS Global Wealth Management’s chief investment office.
Planned European Union rules requiring investments to be in line with climate policy should be used to guide economic recovery measures after the coronavirus pandemic, despite not yet being law, the bloc’s expert advisers said on Monday.
With the bloc headed for a steep recession and its executive, the European Commission, drawing up a trillion-euro recovery plan, calls are growing from politicians, companies and campaigners to make sure the money does not prop up environmentally damaging industries.
The Commission had planned to introduce rules on which investments can be called “green” from 2021, forcing providers of financial products to disclose which investments meet the criteria - known as the EU “sustainable finance taxonomy”.
The destruction caused by natural disasters, which is becoming more frequent and severe due to climate change, is graphic and frightening. However, there is a significant impact on the financial system as well when insured losses increase in the aftermath of such events. Additionally, there is a risk of stranded assets when countries transition to low-carbon alternatives. Yet, the financial sector does little to reduce such risks from climate change by not investing enough in risk mitigation or building climate resilience.
The financial sector can be a partner in fighting climate change, but so far that is not the case in Asia-Pacific. In 2019, ESCAP estimated that the region needs to invest an additional $1.5 trillion annually to implement the 2030 Agenda for Sustainable Development, requiring financial contributions from the private sector, to build resiliency in infrastructure, energy needs and social safety nets. The Economic and Social Survey of Asia and the Pacific 2020 further points out that instead of increasing, the market share of renewable energy declined from 17 per cent in 1990 to 12 per cent in 2017. This is despite a growing interest by investors in seeking sustainable investments.
Deutsche Bank AG has set up a dedicated sustainable finance team within its capital markets division in response to the growing focus on environmental, social and governance issues among its clients.
The German lender has hired Trisha Taneja from Sustainalytics to lead the team, which will operate within its existing capital solutions and sustainable financing group, according to an internal memo seen by Bloomberg. Green and social financing has become an increasingly competitive sector globally as the fight against climate change steps up.
Last month, the overseas asset management arm of Ping An Insurance Group became the first Asian institutional investor to partner with the Climate Bonds Initiative, a UK-based advocate for green bonds. That followed the group becoming the first Chinese asset owner to join the UN-supported Principles for Responsible Investment in 2019. It later also signed up for the Climate Action 100+ initiative, which brings together investors who aspire to raise corporate climate commitments of the largest greenhouse gas emitters in their portfolios.
Ping An’s actions have added it to a short list of Chinese asset owners with a public commitment to climate action, and it is the only Chinese insurance company to have issued a coal phase-out plan. It is time for other Chinese asset owners to act too.
As the first country to report the cases of Covid-19 and the first to implement lockdown measures, many western countries have taken their cue from China in how to handle the virus's spread. It could be that the Asian powerhouse also provides the clues for how a recovery could look.
The Chinese stock market plunged at the end of January as the government locked down the Hubei province in an attempt stop the coronavirus spreading. The rest of the world looked on in horror.
Just weeks later, however, and already there is evidence that the economy is bouncing back and green shoots of recovery are appearing across many sectors. Indeed, Chinese-focused funds have already started to claw their way back towards positive territory, after a tough start to the year.
The urgency to address climate change has caused investors to put sustainability and Environmental, Social and Governance (ESG) practices at the heart of their business strategy.
Both regulators and government authorities have also began introducing a series of nation-wide sustainability initiatives aimed at reversing the consequences of climate change and have called on institutions to champion these agendas. This increased support has helped to drive a paradigm shift from “green” to “sustainable” to encompass an entirely sustainable agenda.
We are now seeing considerable efforts towards gauging investors’ and institutions’ interest in pursuing sustainable practices and introducing comprehensive sustainable agendas. One method of ensuring that financing activities reflect the full range of sustainable activities is by combining the underlying principles of doing less harm and striving to do better.
The World Bank’s Board of Executive Directors today approved a loan of Euro 267.2 million (US$300 million equivalent) for China to foster green agriculture investments, development of standards, and technological innovation in Henan Province.
China’s agricultural sector accounts for about 14 percent of global agriculture-related greenhouse gas (GHG) emissions and is a major source of two highly potent GHGs: methane and nitrous oxide. The level of green financing in China is low due to a general reluctance of financial sector institutions to finance agriculture investments, which are perceived to be of high risk and relatively low return. Lack of clear green finance standards has also been an obstacle to developing the market and attracting investments.
Climate change is already a reality. The deadly bushfires in Australia, ferocious flooding in Indonesia and extended droughts in Vietnam have led to the destruction of infrastructure, investments and livelihoods. Yet across Asia, acceptance of this reality has not yet changed consumer behaviors across the region.
After a temporary slowdown in the past five years, greenhouse gas emissions rose to a historical high of 33.1 billion tons in 2018. Globally, fossil fuel-related carbon emissions rose by 1.7% from the previous year. There is a sustained increase in coal, oil and gas consumption in China, India and ASEAN, pointing to a seeming neglect of climate change concerns as Asia chases faster economic growth.
European policymakers should use a two-tier approach to define sustainable investments in order to smooth the bloc’s transition to a low carbon economy, a group of industry experts has said. The first category proposed by the group on Monday (9 March) would meet strict ‘green’ criteria, with the second including investments that can prove they “do no significant harm”.
The European Commission will use the Technical Expert Group’s (TEG) recommendations to develop rules defining what qualifies as a green investment.
This ‘taxonomy’ is a key plank of the Commission’s “Green Deal” plan to reduce the bloc’s net greenhouse gas emissions to zero by 2050, through policy measures touching sectors from agriculture, to trade, taxation, energy and industry. EU financial services chief Valdis Dombrovskis welcomed the TEG’s input, as part of efforts to “spur the take-up of sustainable finance in Europe”.
When it comes to sustainable finance, we’re still on the frontier of the Wild West. It’s a place of untold potential, romance, chaos and the vast unknown. As the climate crisis unfolds, interest from investors in this fertile ground is reaching fever pitch. Yet the current green rush has the potential to turn into a monumental greenwash unless it’s tamed soon. Luckily help is at hand.
“To be sustainable, we need to define sustainable,” says Adam Matthews, director of engagement at the Church of England Pensions Board, and therein lies the crux of the issue. There are certainly more than 50 shades of green finance, wrapped up in buzzwords, glossy brochures, soft-focus images and claims that a product is ethical. But it can be fool’s gold.
The present and future impacts of climate change, human rights violations, environmental, labor and regulatory violations and poor corporate governance on the quality of investments and credit risks have spurred widespread recognition for the importance of environmental, social and governance (ESG) considerations in lending and investment activities.
The rapid development of the sustainable finance sector seen in 2019 has continued into 2020. “Sustainable finance” is a very broad term, but in short, it is any form of financial service and/or product which integrates ESG criteria into business, financing or investment decisions. The financial markets are now starting to possess a range of tools in the “sustainable finance” space.
EC-Link Project has its focus in sustaining the development of sustainable urbanization and the dialogue among European and Chinese municipalities. It aims to assist Chinese and European cities in implementing energy and resource-efficient measures by sharing European cities’ experiences in sustainable urbanisation.
In order to support such dialogue, and to provide a better understanding of the sustainable urbanization sector, EC-Link has been working for years compiling a set of publications “EC-Link Knowledge Center” meant to be seen as a platform of experience for easy accessible exchange between Chinese and European cities on low carbon/eco city development issues.
EC-Link project is mostly focusing its attention towards 7 main sectors: compact urban development, green buildings, green transport, water management, solid waste management, green energy and municipal finance.
For each of above sectors, EC-Link has drafted a set of “Position Papers”; each Paper offering an overall outlook on the specific area, proving a testing ground for innovations in specific low-carbon policies and technologies’ application.
Together with the Position Papers, EC-link Project has developed a set of “Guidelines”; the objectives of this Eco-City Implementation Guideline are to provide guidance, and to ensure compliance. The documents are meant for all Chinese and European cities which are supporting eco-cities programme. Besides guidance, the document will help to ensure compliance of cities with the normative part proposed under this guideline.
All EC-Link Publications can easily downloaded at the following links:
- http://www.eclink.org/eclink/en/sectors/about (for English)
- http://www.eclink.org/eclink/zh/sectors/about (for Chinese)
The European Commission is hoping that the long-awaited “taxonomy for sustainable finance” will stimulate billions of euros in investment to help the now 27-member bloc achieve its aim of becoming the first continent to reach climate neutrality by 2050.
In the absence of any common minimum legal standards, asset managers have until now largely been free to self-certify and market funds as being environmentally friendly, leaving many investors confused as to what they were actually buying.
A report on greenwashing from London-based wealth manager SCM Direct, published in November, found that definitions of ‘ethical’, ‘socially responsible’ or ‘sustainable’ investing are so loose that funds can effectively invest in whatever stocks they want.
The European Investment Bank (EIB), in his enhanced role as the EU Climate Bank, is stepping up its support to Polish towns to implement ambitious energy efficiency programmes. The heating distribution operators of Bydgoszcz and Lublin will receive EIB loans to modernise their networks, which will result in energy savings thanks to reduced energy losses and better air quality for their populations. The EIB will lend PLN 100m (equivalent to €23,2m) to Bydgoszcz's district heating operator to finance the upgrade of the City's district heating network and part of its energy generation system. The neighbouring municipalities (Solec Kujawski, Szubin, Nakło nad Notecią and Koronowo) will also share the benefit.
EU funding for projects to be implemented in Greece, is expected to increase by 8 percent compared to the previous seven-year program, said European Commission Vice President Margaritis Schinas during the National Development Strategy Conference held in Athens, this month. According to a European Commission proposal, a total of 19.2 billion euros – up from 17.8 billion euros in 2014-2020 – is to be allocated to Greece under the EU’s National Strategic Reference Framework (NSRF) for 2021-2027, focusing primarily on projects in agriculture, migration, and the transition to the green economy.
The infrastructure investing business appears to have turned itself into a perpetual motion machine. The underlying assets — toll roads, pipelines and wind turbines — are teetering on a pyramid of thinner profits and higher risks.But the investing public does not seem to notice. Despite weak earnings, the infrastructure funds have been able to trade those assets back and forth with each other for ever-higher prices. Then they use the mark-to-model results to raise more money from institutional investors and the public markets. According to Preqin, a data provider, infrastructure funds raised $98bn in 2019, even though their internal rate of return tumbled from 12.8 per cent in 2018 to 7.7 per cent. They have a record $212bn of dry powder — money that has been secured but not committed to any particular investment. That is double the size of the money bin they had five years ago.
Green and sustainable finance has made a steep ascent in Germany last year and established itself as a key element of climate policy. Government plans to become a leading location for green financial products, intensifying EU regulation to make finance compatible with its Green Deal and a growing debate around the European Central Bank's responsibility for climate action are poised to dominate the debate in 2020. But while the volume of green investments in Germany is rising quickly, sustainable finance experts warn that the government needs to make up its mind and find a clear position on how it plans to integrate finance in its environmental policies in order to shape developments rather than just following them.
The Serbian government and German development bank KfW have signed financing agreements of EUR 11 million for regional landfills in Kruševac and Vranje, according to the Serbian Ministry for Construction, Transport, and Infrastructure. Serbian Construction, Transport, and Infrastructure Minister Zorana Mihajlović said that out of EUR 11 million, EUR 10 million is a donation for the preparation of technical and design documentation for two regional landfills. Another EUR 22 million has been secured for the landfills in Kruševac and Vranje, making it a total of EUR 33 million available for project documentation and construction of regional solid waste landfills in Kruševac and Vranje, she said.
The EC-Link Project was invited to attend the Workshop on Finance for Low-Carbon Urban Infrastructure in China, held in Beijing on December 11, 2019.
The workshop was organized by FELICITY (Financing for low-carbon investment – city advisory facility); the Project is funded by the International Climate Initiative (IKI) of the German Federal Ministry of Environment, Nature Conservation and Nuclear Safety (BMU and implemented by the GIZ in collaboration with the European Investment Bank (EIB). Felicity aims to make low-carbon urban infrastructure projects bankable and increase access to climate finance at the subnational level by providing technical assistance and advisory services, especially to projects developers and municipalities.
The Workshop saw the participation of European and Chinese stakeholders interested in supporting the development of municipal green finance in China and in supporting Chinese cities in implementing green urban projects. During the event, the participants shared multiple views in analyzing the sustainable development of green and sustainable cities, particularly in China, such as: the urgency to provide tailored services according to cities needs, the urgency to develop transport systems in line with cities’ requirements, and also the importance to sustain such important development with integrated green finance support.
Indeed, Green finance plays a fundamental role in sustaining Chinese ambitious urban development program; in upcoming years Chinese municipalities will develop more and more urban projects, they will need to move out from traditional finance solutions and to get closer to the many opportunities provided from green municipal finance.
EC-Link project was invited to provide a general outlook of green municipal finance sector in China and moreover, to show how practically it is supporting Chinese cities in such process. EC-Link Key Expert presented on-going cooperation in Qingdao. Currently, the Project is supporting Qingdao in developing two green municipal finance projects. The Qingdao Green Public Transportation system demonstration project is designed to be implemented in terms of developing low carbon and green traffic. The Comprehensive energy efficiency improvement project is designed to retrofit public buildings and residential buildings in Qingdao city, for reducing energy consumption and improving the energy efficiency for existing buildings.
EC-LINK Project is actively engaged in city-level cooperation and communication work in China and providing green finance assistance. It will continue its work in sustaining an effective dialogue between Chinese Municipalities and main Chinese and International Banks and Funds.
A total of 56 major projects were signed at this year's Financial Summit of China-Singapore (Chongqing) Demonstration Initiative on Strategic Connectivity held Monday in southwest China's Chongqing Municipality, with an aggregate amount of 194.5 billion yuan (about 27.7 billion U.S. dollars). The projects involved areas including green bonds, debt financing, cross-border logistics, education and tourism, in a bid to enhance financial cooperation under the initiative. The summit was co-hosted by the Ministry of Commerce, the People's Bank of China, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission, the State Administration of Foreign Exchange and the Chongqing municipal government, as well as the Ministry of Trade and Industry and the Monetary Authority of Singapore.
As the operating center of the China-Singapore demonstration initiative on strategic connectivity, southwest China's Chongqing Municipality is taking the regional lead in contributing to connectivity with ASEAN and promoting cooperation along the Belt and Road routes.
Evidence of this is that a total of 56 major projects were signed at this year's China-Singapore (Chongqing) Connectivity Initiative Financial Summit held Monday in the city, with an aggregate amount of 194.5 billion yuan (about $27.7 billion).
The projects include those involving the issuance of green bonds, debt financing, cross-border logistics, education and tourism.
More than 300 government officials, business people and scholars from China, Singapore and other ASEAN countries attended the summit and discussed topics including cross-border investment and financing, financial technology, inclusive finance, green finance, supply chain finance and logistics finance.
The EU should commit to net-zero CO2 emissions by 2050 at the UN Conference and step up its emissions’ reduction ambition for 2030, said the Environment Committee on Wednesday.
Ahead of the COP25 UN Climate Change Conference in Madrid in December, the Environment, Public Health and Food Safety Committee approved on Wednesday a resolution calling on the EU to submit its long-term strategy to reach climate neutrality at the latest by 2050 to the UN Convention on Climate Change as soon as possible. This would guarantee the EU maintains its world leadership in the fight against climate change.
They also highlighted the need for the EU to raise its ambition level for 2030 in order to reach the 2050 target. MEPs expect the European Green Deal announced by European Commission President-elect Ursula Von Der Leyen to include a target of 55% emissions reductions by 2030.
Can finance contribute to seafood sustainability? This is an increasingly relevant question given the projected growth of seafood demand and the magnitude of social and environmental issues associated with its production.
Since the 1960s, aquaculture has been the world’s fastest-growing food sector. Rates of fish consumption have been increasing twice as rapidly as population growth, and fish has become one of the most traded food commodities.
Today, more than 90% of the world’s fisheries are either overexploited or fully exploited, and the sector is plagued with unsustainable practices, ranging from illegal fishing and habitat destruction to overuse of antibiotics and forced labour.
The future European Commission, headed up by Ursula von der Leyen, will put sustainability and inclusivity at the heart of the European financial policy. Over the last weeks, as the European Parliament elected Ms von der Leyen and approved most of her team, it was clear that advancing sustainable finance will be a key driver in their ambition for Europe to become the first climate-neutral continent.
Valdis Dombrovskis (ex-Prime Minister and Minister of Finance of the Republic of Latvia) will become Executive Vice-President of ‘An Economy that Works for People’ and Commissioner for financial services. He spearheaded sustainable finance in the EU under his role as Commissioner in the Juncker Commission and he’ll continue where he left off.
Content: On September 2, Industrial Bank Co., Ltd. signed the Green Financial Cooperation Agreement with the Management Center of China Clean Development Mechanism Fund (hereinafter referred to as “CDM Fund”), to jointly innovate a green financing model for clean development in order to support the country’s response to climate change and help local economies’ green transformation. At the same time, the first project under the cooperation mode is being implemented in Wenzhou, Zhejiang Province.
According to the Agreement, the two sides will, in accordance with the national eco-environmental protection plan and energy conservation and emission reduction targets, play out the guidance and leverage role of the Fund and the green finance capabilities and advantages of the Industrial Bank Co., Ltd. to innovate a green financing model for clean development. They will jointly promote business cooperation and product innovation such as green financing and investment, green bonds, green wealth management and other environmentally friendly cooperation. They will cooperate in green financial policy research, participate in relevant standards research and formulation, and accelerate the construction of China’s green financial system and ecological civilization. According to Mr. LUO Shiyi, General Manager of the Green Finance Department of the Industrial Bank Co., Ltd., the innovative green financing model that the two sides are working on will provide financing support for projects through three mechanisms: One is the Industrial Bank Co., Ltd. to lend the Fund’s money as it is entrusted by the Fund. Second, the Bank provides guarantees for the funds provided by the Fund, to guarantee security of the policy fund while supporting low-carbon projects. And third, the Bank and the Fund jointly provide loans for enterprises, while the Bank provides guarantees for the funds provided by the Fund.
Content: On September 2, Tsinghua University’s Wudaokou Center for Financial and Development Research (Tsinghua CFD), together with the Vivid Economics and the ClimateWorks Foundation, released the world’s first quantitative research report on green investment and carbon emission reduction paths in countries covered under the “Belt & Road Initiative”. According to the report, at least $12 trillion will be needed to green-invest in the infrastructure of the “Belt and Road” countries in 2016-2030 in order to ensure compliance with the Paris Agreement’s climate objectives. The report also pointed out that the “‘Belt & Road’ Initiative (BRI) can serve as an important platform to mobilize green investment and promote to construct a green financial system along the ‘Belt & Road’ countries.”
Business enterprises from the BENELUX will have access to a significant amount of funding for sustainable investment, as announced by the European Investment Bank. This was made possible after an agreement was reached between the EU bank and ING for a total of EUR 400 million. The amount will be provided in the form of multiple loans with preferential interest rates to business enterprises located in the three countries and aims to help them invest in sustainable projects. Half of it will go to businesses in the Netherlands and the rest will be allocated to Belgium and Luxembourg.
The involvement of the EU bank is crucial to the beneficiaries as it guarantees a particularly low interest rate – at only 0.3%. The former will verse 200 million euros to ING which in turn will double it and distribute it to its clients for selected projects. This action contributes to the existing program of ING operating in BENELUX successfully since 2018. The new financing programme will enter in operation next month.
Content: Central banks should play a more active role in promoting green finance, according to Ma Jun, member of the PBOC`s Monetary Policy Committee and Chair of Supervision Workstream of NGFS, the Central Banks and Supervisors Network for Greening the Financial System.
“Green `QE` is an interesting idea for central banks to support the green finance market” Ma told MNI in the second part of an exclusive interview.
“The PBOC initiated the green re-lending program that provides low-cost funds for commercial banks to lend to green projects since 2017, which, to some extent, resembles Green QE in terms of its role in reducing costs of green funding,” said Ma, who is also Chairman of the Green Finance Committee of China Society for Finance and Banking, an industrial association set up by the PBOC to promote green finance.
The European Investment Bank (EIB) will provide a 125 million euros loan to Italy’s Friuli Venezia Giulia Region for the implementation of its 2019-2021 infrastructure plan. This is the first direct loan between the EU financial institution and the Region, announced EIB.
The funding will be used to implement the works in different sectors included in the regional plan. In the list are projects promoted by public entities in the areas of anti-seismic adaptation and energy efficiency upgrading of school buildings, social infrastructure such as hospitals, co-generation and energy efficiency projects, renewable energy generation and improvements in the utilisation of water resources. It will also include projects aimed at enhancing the historic, natural and cultural heritage of the region.
In June 2015, the creation of the Asian Infrastructure Investment Bank (AIIB) was agreed to by representatives of 50 countries in Beijing, China. The Bank started operating in January 2016 and its first four loans – totaling USD 509 million – were approved for Bangladesh, Indonesia, Pakistan, and Tajikistan. Moreover, a location in Beijing was chosen as the headquarters of this new multilateral banking organization.
The AIIB started with an initial capital of USD 100 billion. In order to keep things in perspective, the sum is roughly equivalent to Ecuador’s GDP. So far, it has approved projects related to hydropower, energy, motorways, tourism, dams, pipelines, and ports, amongst others.
This venture has captured considerable interest. For instance, some economists foresee the AIIB becoming a formidable competitor of the World Bank and the International Monetary Fund, entities established within the framework of the Bretton Woods system during the aftermath of World War Two, and whose governance has been historically controlled by Atlanticist powers ever since. In fact, this reality still persists in the early 21st century. However, that is hardly surprising if one considers that – more often than not – intergovernmental institutions reflect the interests of their creators.
Source: Geopolitical Monitor - https://www.geopoliticalmonitor.com/geopolitics-and-the-asian-infrastructure-investment-bank56/
China is committed to building an open economy within the framework of globalization, said Li Keqiang, Premier of the People’s Republic of China, at the opening plenary of the World Economic Forum’s 13th Annual Meeting of the New Champions.
Premier Li reaffirmed China’s readiness to work with the international community to steer economic globalization.
“We now live in a world of profound interdependence,” he stressed. “Countries rely on each other’s markets. No country can single-handedly provide all resources … or offer all needed goods to consumers. Nor can any country sustain its development in isolation from the global system.” Li underlined that “fundamental principles, such as free trade, must be upheld.”
Source: Modern Diplomacy - https://moderndiplomacy.eu/2019/07/04/china-doubles-down-on-economic-globalization/
In light in EC-Link Project’s actions to support Chinese municipalities in developing municipal green finance projects; EC-Link performed a mission in Zhuzhou meant to mainly perform a pre-investigation and information collection relevant information on local projects so to develop an assessment useful to support Zhuzhou municipality in developing green finance projects.
Zhuzhou Local HURD in particular presented to EC-Link Projects two projects’ proposal.
1. An energy station project proposed by CECEP Zhuzhou urban energy conservation Co, Ltd under the CECEP group. The project is designed to provide heating & cooling to large areas in CBD, Commercial and residential areas. The main technology is Water sources heating pump.
2. Zhongtian group pre-fabricated building material project, which the Zhongtian Zhuzhou company plan to build a factory to manufacture the materials for pre-fabricated assembling buildings.
Zhuzhou already has experience of IFIs financing, ADB funding project on land rehabilitation and World Bank funding project. Still, as any Chinese municipality, Zhuzhou is constantly working to control its level of debt; for this reason, Zhuzhou is asking EC-Link Project support to explore more and diversified financing resources.
EC-Link and Zhuzhou HURD will continue their on-going cooperation; in next future two parties will work together to collect potential candidate projects, prepare a more definitive projects’ list so to allow EC-Link to pre-evaluate which one could be financed by green financing mechanism.
Guilin Municipal Government held a meeting for jointly review the implementation plan of the PPP project — the water diversion subproject of the second water source project of Guilin City and the cost. Guilin invited senior experts and relevant functional departments of counties and districts to make suggestions for the project in order to create a replicable and scalable implementation paradigm in which the city’s water supply projects use social capital.
The second water source project of Guilin City is an important deployment of the Guilin Municipal Party Committee and the Municipal Government to implement the requirements of the State and Guangxi autonomous region on enhancing security of drinking water for the city. It is an urgent need for the city to improve water quality and supply security and meet the environmental protection requirements of water. It is composed of two parts: the water diversion subproject and the Xicheng water plant subproject. Among them, the water diversion subproject will use the PPP mode (Public-Private-Partnership), which is a model of cooperation between government and social capital. It includes the water intake at Qingshitan Reservoir (including tunnel) and the raw water pipeline, and will supply 400,000 tons of water per day — the designed supply capacity.
In order to effectively solve the problem that it takes too much deposits in the construction industry that results in shortage in working capital in construction companies, since October 2018, the Municipal Housing and Urban-Rural Development Bureau has taken the lead in launching the pilot guarantee insurance project for the industry in the city. It carried out 5 types of insurances including construction project quality defect warranty, construction project owner payment, construction project bid, construction project contract performance, and migrant workers’ wages to replace the various types of deposits. Up to now, the city has carried out 2,366 transactions of various types of guarantee insurances, and saved corporate funds by RMB 1.73 billion, effectively alleviating the financial pressure on construction enterprises.
This year, Asia will account for half of the world’s GDP growth. And while this has undoubtedly improved living standards and reduced poverty in recent years, such gains have come at a cost.
Degraded natural resources and ecosystems, worsened water stresses, and increased levels of hazardous waste, comprise just some of the many unintended byproducts of Asia’s resource-intensive growth model–exposing the entire region to a domino effect of risks. Take water, for example, one recent study by MIT suggests that more than 100 million people in the region could endure severe shortages over the next decade, with devastating impacts on food security, economic growth and political stability. Without meaningful action to address climate risks, GDP in the Asia-Pacific region could decrease by more than 3% by 2050–a significant erosion of the region’s economic gains in recent decades. Furthermore, Asia-Pacific economies still feature among the highest rates of income inequality in the world. In this region, one percentage point increase in the Gini coefficient, a generally accepted measure of inequality, reduces GDP per capita by $154.
A UK government minister said that one of the priorities for the country after it leaves the European Union is to become a global hub for green finance.
John Glen MP, economic secretary to the Treasury, gave a keynote speech at the City Week 2019 conference in London this morning. Glen said other priorities, in addition to green finance, are fintech, India and China.
He said: “More than 100 green bonds have been listed in London to date, from 16 countries raising $26bn (€23bn). Our aim is to establish the UK as the undisputed global hub of green finance, with links to all the major markets.”
Glen noted that in addition to green bonds, other initiatives gaining traction include green loans, green mortgages and environmental, social and governance (ESG) exchange-traded funds.
Source: Markets Media - https://www.marketsmedia.com/uk-aims-to-be-global-green-finance-hub/
The European Investment Bank (EIB) has green-lit €4 billion in financing for clean energy generation, green transport and clean water projects in 18 countries.
The funds will be channelled into green urban transport projects, which will target increasing the use of electric public transport such as buses, trams and rail-based transport in Marseille and Rotterdam, and will also extend credit to Danish projects focussing on energy efficiency.
Two new offshore wind farms off the coast of France at Saint Nazaire and Fecamp with a total capacity of 1GW will also receive funding, as well as energy efficiency and district heating improvements in Belarus.
Cities are currently both climate-culprit and climate-victim. They are already responsible for 70 percent of global energy-related greenhouse gas emissions and 65 percent of global energy demand; they could easily account for more than three-quarters of electricity use by 2030. Cities in emerging economies, where 95 percent of population growth to 2030 and beyond will occur, will account for the majority (70 percent) of global growth in energy use through 2030.
Investments in low-carbon city projects have significant benefits for urban and rural citizens alike. A research review found that the economic and social benefits of those investments, such a improvements in citizen health, jobs generated, poverty and inequality eliminated, were many times greater even than the $17 trillion value. As just one example, health benefits of improved heating and insulation can be more than 10 times the value of energy savings.
Source: Green Biz - https://www.greenbiz.com/article/3-steps-thriving-zero-carbon-cities
EC-Link held a technical training on Green Municipal Finance in Qingdao meant to support Qingdao HURD and technical stakeholders (Sino-German Eco Park, China State Construction Engineering Corporation, China Academy of Building Research, and China Energy Conservation and Environmental Protection Group) ECin developing municipal green finance projects.
In particular, the focus of the training was to assist Qingdao agencies in the financial planning of their projects so to link them to potential finance funds, banks and projects such as the Shandong Green Development Fund (SGDF), Felicity Project, KfW, ADB, AFD, etc.
Mr. Liu Yuyong, deputy director of the Housing and Rural-Urban Development Bureau, attended the meeting. He emphasized how, in recent years, the Bureau has comprehensively promoted green buildings by focusing on the concepts of green development and “transformation from old to new driving forces”. By leveraging on the opportunities of China-EU and Sino-German on-going cooperation, Qingdao established a green eco-zone index system and a low-carbon eco-city expert cooperation mechanism and adopted the international concept of green city to promote the construction of ecological urban areas such as in the Sino-German Eco Park.
EC Link Team, together with Qingdao HURD, conducted a set of site visits and worked with local project teams on data collection to have a better understanding of to the projects and effectively assess their potential for receiving future financing.
Indeed, EC Link Project plans to support the launching of one (or more) pilot project on municipal green financing in Qingdao. Through the introduction of capital coming from the Asian Development Bank, Kfw as well as Shandong Green Development Fund, it will be possible so to enhance and expand international cooperation in the municipal green finance sector.
On March 29, the Municipal Bureau of Landscape officially issued Zhuzhou City’s 2019 Landscaping Construction Plan for Creation of a National Ecological Garden City (hereinafter referred to as the “Plan”), confirming that Zhuzhou municipality is planning numerous projects within the “green welfare” sector. Projects are divided into seven categories: parks, wetland landscapes, urban green corridors, road and square greening, upgrading the greening of old community’s landscapes, public toilet construction and others. A total of 61 green projects are planned for the year, with an annual total planned investment of 634 million yuan.
Main infrastructure projects will be promoted to support the sustainable and efficient development of all planned projects.
The urban green corridors are an important “skeleton” for the city. This year, the Ecological Landscape Belt at the Xiawan Port, the Ecological Landscape Belt at the Tianyuan District Self-employment Park, the Central Avenue’s Landscape Belt, the Shennong Ecological Belt, and the Civic Center Landscape, will be built as fast as possible.
Cities are the defining form of human organization in the 21st century. In 1980, just 1.7 billion people lived in cities. By 2050, the world’s urban population will swell to 6.4 billion. By the end of this century, 80-90% of humanity is expected to be city dwellers. The vast majority of tomorrow’s urban growth will occur in the medium-sized and large sprawling cities of Africa and Asia. And since many cities are urbanizing before they industrialize, the slum population is set to double in the next decade. While everyone agrees that cities are growing in size and scale, there’s a worrying silence about what they will look like, much less how they will be financed.
The future of urbanization hangs in the balance. If unplanned, tomorrow’s large and intermediate cities may be condemned to fragility – sprawling, polluting, congested and impoverished. If designed with the future in mind, tomorrow’s cities can be resilient – dense, green, human-centered and prosperous. The urban dilemma can be converted into an opportunity, but doing so will require a dramatic change of mindset. Decisions taken in the coming years by national and municipal public authorities, business leaders, and investors and civic entrepreneurs will have monumental implications for what happens next.
Source: European Sting - https://europeansting.com/2019/04/01/innovative-urban-financing-can-make-our-cities-stronger/
In recent years, Qingdao Municipal Finance Department has fully exerted in fully supporting guaranteed loans for start-ups in accordance with the principles of high starting point, high architecture and wide inclusiveness. Up to now, the financial institutions in the city have issued 19,800 guaranteed loans for start-ups, worth 2.5 billion yuan. The loans have been used to promote entrepreneurship, and promote employment of more than 66,000 persons. With such practical actions, the Municipal Finance Department supports the development of the private economy, and promotes mass entrepreneurship.
Within such process, Qingdao Municipal Government is stickily focusing on three main elements: First is to increase policy support and help break the bottleneck in venture financing; Second is to improve the guarantee support system to reduce the cost of venture financing.; Third to innovate the credit guarantee model to lower the threshold for venture financing.
In 2018, Jimo District in Qingdao accelerated the comprehensive finance and wealth management reform, by taking the spirit of “replacement of old driving forces with new ones” as its main thread. It established the country’s first fund incubation base controlled by the regional equity market operation institution to build a comprehensive service platform that covers the full fund industry chain of “fundraising, investment, management and exit”. By such efforts, it aims to promote a virtuous cycle and healthy development between the economy and finance, and inject new vitality into the economy for high-quality regional development.
At present, the Fund Workshop has attracted 71 private equity funds such as Morgan Stanley Securities, CITIC Securities, Taifu Excellence, Henglan Zelin, etc. The total scale of funds management is over 20 billion yuan. Moreover, the Fund can play the function of investment attraction; successfully introducing some emerging industries within Jimo District.
Since 2015 when the new budget law came into force, issuance of local government bonds has become the only way for the government’s debt financing. Under the correct leadership of the municipal party committee and municipal government, the Municipal Finance Department actively reported to China’s Ministry of Finance on the financial pressure faced by the city in the construction of major public welfare projects, and obtained an understanding and strong support from the Ministry.
According to the unified deployment of the Ministry of Finance and the principle of “Issue early, fund-use early, and see early effectiveness”, the city has launched this year’s government bond issuance in January. Up to now, it has successfully issued 10.2 billion yuan of local government bonds, including 5.7 billion yuan of general bonds, and 4.5 billion yuan of special bonds. The raised money will provide a strong financial support for the construction of public welfare projects such as traffic system, Yellow-river West-east Diversion Project, and shantytown renovation.
In the next step, the city will promptly and scientifically allocate the newly-increased debt limits in accordance with the requirements of the Ministry of Finance. It will further accelerate the bond issuance. And it will use the raised funds to increase financial support for key projects of national, provincial and municipal governments, so to make better play of government bonds to stabilize investments, expand domestic demand and strengthen the economy weak points.
Across the nation, countless cities with antiquated sewer and storm-water systems are under orders from the U.S. Environmental Protection Agency (EPA) to reduce storm-water runoff to decrease the amount of pollution entering local waterways. When Washington, D.C., faced this problem, city officials decided to experiment with green infrastructure rather than investing in expensive new pumps and pipes. Since green infrastructure had never been implemented on such a large scale, however, the city faced a huge challenge when it came to financing the project.
For the city, the solution was to launch the country’s first Environmental Impact Bond, or EIB. Considered a “pay for success” strategy, an EIB allows cities to share both the risks and the rewards of solving problems through innovative strategies with investors. They make it possible for governments, investors and other participants to focus on overall outcomes rather than specific activities, and they are proving successful.
Source: Water Finance Management - https://waterfm.com/a-closer-look-at-environmental-impact-bonds/
EC-Link Project organized the China Urban Green Finance - Third Network Meeting at the European Embassy in Beijing. In line with on-going EC-Link Project’s activities, the Meeting was organized so to provide:
- An overview of Green Finance investment framework in China;
- Taxonomy of mechanisms to support Green Finance;
- Assess the China case in relation to actual programs of support;
- Provide some recommendations on potential gaps which future support could bridge.
The meeting saw the participation of more than 40 people representing major European and Chinese stakeholders involved in the municipal green finance sector.
Within three hours of active discussion, Participants focused their attention towards three main topics:
- Ms. Jiu Miao (Director, Technology Promotion Center, MoHURD), presented “Outlooks and prospects of China’s green buildings and green industry”; focusing on ways to potential cooperation between the E.U. and China, hopefully setting same standards for green buildings;and due to present subsidies exist for green buildings in 14 Chinese provinces, how it’s possible incentivize developers to introduce in China best available technique within the sector.
- Mr. Christoph Nedopil Wang (Director of Greening the BRI, IIGF) presented “Green urban transport in China: an opportunity for green finance”; focusing on how to align the two worlds of green transportation design/tech/engineering and municipal green finance; highlighting how, due to the lack of knowledge within the transport sector, the finance community can contribute by spreading awareness within the sector.
- Finally, Mr. Gregor Grossman (Junior Advisor, Sustainable Infrastructure Alliance - GIZ), made a presentation on “Sustainable infrastructure standards in China and support for municipal green finance projects”; highlighting how there are standards differences between sectors as well as differences between countries. Standards need to use sustainability criteria that make it possible to compare projects across regions and countries. So, the standard has to have a certain amount of flexibility to set international best practice.
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.
China is encouraging insurance institutions to invest in more good quality stocks and bonds to improve their portfolios, its banking and insurance regulator said on 28 January 2019. “This will help ensure stability in the capital markets and will allow insurers to improve their investment portfolios,” the China Banking and Insurance Regulatory Commission said in his brief statement.
The Technical Expert Group on Sustainable Finance (TEG) set up by the European Commission has requested feedback on the development of an EU-wide classification system for environmentally sustainable economic activities.
A unified taxonomy would make it possible to determine which investments, such as loans, stocks and bonds are environmentally sustainable, making it easier for market participants to finance these activities and limiting the risk of green-washing.
The taxonomy will lay the foundation for all other measures on sustainable finance. It will help investors, including individuals, invest their money in line with their sustainability preferences and build momentum for climate-friendly investments.
Source: Climate-KIC - https://www.climate-kic.org/news/feedback-sustainable-finance-definition/
A few short months later, the European Commission released its Action Plan on Financing Sustainable Growth and soon after released the three legislative proposals that have shaped the progression of work since then, covering the disclosure of sustainability risks, a pan-European taxonomy to classify environmentally friendly activities, and low-carbon benchmarks.
The year since has brought with it tangible progress: the European Parliament is currently discussing amendments to the taxonomy that could see the introduction of stronger human rights safeguards for environmentally-friendly activities, as ShareAction and others have called for, while the final stages of negotiations on the Disclosure Regulation could secure reporting on sustainability risks for mainstream products, not just those in the green niche.
The Asian Development Bank (ADB) and AgenceFranaise de Developpement (AFD) have jointly decided to increase their funding for projects in Asia Pacific by two thirds.
The pair signed an agreement on Friday lifting the $3 billion they committed to in the past 3 years, to $5 billion for the next 3 years.
The move will allow the pair to scale up their joint development efforts in the Asia and Pacific region.
Under the Partnership Framework Agreement (PFA) for 20162022 that ADB and AFD signed in October 2016, the two institutions had agreed to each dedicate $1.5 billion in cofinancing in the first 3 years of the 6-year agreement. ADB and AFD have now decided to increase the amount to $2.5 billion each in the next 3 years, bringing their combined commitment to $5 billion.
Source: Sierra Leone Times - https://www.sierraleonetimes.com/news/259446175/asian-development-bank-and-afd-jointly-lift-funding-for-asia-pacifci
Chinese Vice Premier Han Zheng on 31 January 2019 called for more efforts to realize high-quality development of the Belt and Road Initiative (BRI). Han, also a member of the Standing Committee of the Political Bureau of the Communist Party of China (CPC) Central Committee and head of the leading group on advancing BRI development, made the remarks when presiding over a meeting of the leading group at which participants studied relevant remarks and instructions of Xi Jinping, general secretary of the CPC Central Committee.
Source: Xinhua - http://www.xinhuanet.com/english/2019-02/01/c_137790382.htm
China is reshaping the approach of its flagship “Belt and Road Initiative” in Southeast Asia, as Chinese projects in the region plunged last year amid growing global scrutiny of Beijing’s development strategy.
The value of newly announced big-ticket deals in the region – investment commitments and construction contracts worth more than US$100 million – dropped 49.7 per cent in 2018 to US$19.2 billion, its lowest in four years, according to analysis by Citi Economics, using data amassed by the US think tank American Enterprise Institute.
Source: South China Morning Post - https://www.scmp.com/news/china/diplomacy/article/2183790/questions-are-raised-about-belt-and-road-projects-slow
As China’s government presses local authorities to accelerate infrastructure projects to bolster the economy, the Finance Ministry lowered its guidance on interest rates for local government bonds, reducing their borrowing costs. The Finance Ministry is requiring that government units issue bonds at a minimum spread of 25 to 40 basis points, or 0.25 to 0.40 %age points, above the five-day average yield of central government bonds of the same maturity, people close to the matter told Caixin.
Sustainable finance is the provision of finance to investments taking into account environmental, social and governance considerations. The recent growth in sustainable finance is seen by many experts as a response by governments seeking to comply with and reach the targets set by the Paris Agreement (a legally binding, global agreement on climate change as agreed in Paris on 12 December 2015). Some other reasons attributed to the growth in sustainable finance (from both an Irish and EU perspective) include:
- EU targets: the EU target of reducing EU-wide CO2 emissions by 40% by 2030.
- Potential investments in the EU: according to the EU High-Level Expert Group on Sustainable Finance, it is estimated that €11.2 trillion of investments in EU climate control measures will be required between 2021 and 2030 in order to meet the above EU target.
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