We all know it very well: China is one of the largest polluters in the world. It is estimated that the cost of carbon emissions to the global economy incurred by Chinese businesses reaches an annual cost of $765 billion.
These costs not only reflect pollution, but also ecosystem depletion and health impacts from business activities. This horrifying number just shows how things need to change in China.
Fortunately, there seems to be a real shift in people’s minds with a rising consciousness about risks associated with environmental issues in China. This shift can be seen for through the apparition of a Chinese movie couple of months ago, “Under the Dome” by Chai Jing, a former and famous Chinese journalist for CCTV.
The movie attracted 200 million viewers within a week after its release and shook mindset of the Chinese population at large, from small households to the most powerful politicians.
The movie reminded the people about the severe state of pollution in China and its associated costs and risks for not only its economy, but for its society’s health and well-being. And it is in April 2015 that an initiative to fundamentally change China’s green financial system was introduced.
The Green Finance Committee
The Green Finance Committee (GFC) was launched by the People’s Bank of China (PBOC) and the United Nations Environment Programme (UNEP), at the same time as the publication of the report Establishing China’s Green Finance System written by the Green Finance Task Force.
GFC is comprised of an elite group from China’s financial community including the top tier regulators, banks, asset managers, insurers and thought leaders, also including 6 international organizations, such as the World Bank.
Under the leadership of Ma Jun, chief economist of the research bureau of the PBOC, the GFC aims at reforming China’s financial system in order to value environmental improvements as much as economic growth.
According to Ma Jun, the GFC will mainly focus on these 6 areas: green finance services, responsible investment, fiscal and policy support, financial and legal infrastructure building, promotion of green sectors and awareness raising.
These areas all have their own research group in the domains of international best practices, environmental effect valuation, green bonds, environmental lender liability, financing models for the green sectors and information disclosure.
Good Ideas, No Financing
According to Jun, China’s main weak point in its environmental efforts is the absence of a systematic policy framework as well as existing policies which have not yet realised their synergetic potential. He also underlines the imbalance in credit policies, which mainly take restrictive approaches for non-environmentally friendly investments.
These policies are not conducive to attracting investment into green industry. Therefore, Jun sees the need to create corresponding policies which are incentive measures for investment in green projects, related to energy-saving technologies, environmental protection, clean energy, and clean infrastructure.
However, as Pan Gongsheng, the deputy governor of PBOC said, the “creation of the green finance system is a long-term and complex process that cannot be accomplished overnight and demands a continuous effort and commitment by all stakeholders”.
Jun also added that “the creation of a comprehensive green finance system is still a distant reality”. As the green finance and green investments are only taking roots in China, how efficient will GFC be in coping with the already severe state of China as well as with the speed at which is it worsening?
Will the GFC be able to sustain its efforts on the long-term and truly succeed in promoting green finance amongst industries on a large scale? Will the GFC be enough to find the way out of the “dome”? The answer is yet to be verified.