Domestic Vs. International BRI Green Efforts:

*Information taken from BNP paribas research

BRI to embrace sustainable development, but…

In its BRI infrastructure projects, China is attempting to embrace five of the 17 United Nations’ Sustainable Development Goals (SDGs), which were adopted in 2015:

  • SDG #6: Clean water and sanitation – ensure access to water and sanitation for all people
  • SDG #7: Affordable and clean energy – ensure access to affordable, reliable, sustainable and modern energy for all people
  • SDG #11: Sustainable cities and communities – make cities and human settlements safe, inclusive, resilient and sustainable
  • SDG #13: Climate action – combat climate change and its impact urgently
  • SDG #17: Partnership for the goals – strengthen the means of implementation and revitalise the global partnership for sustainable development.

However, one of China’s largest investment areas in emerging markets is coal-fired power plants. The Global Environment Institute found that between 2001 and 2016, China developed 240 coal-fired power projects in 68 countries, most of them associated with the BRI since its inception in 2013. These projects provide a total of 251 GW of generating capacity, equivalent to about 25% of China’s domestic coal-fired capacity. This is far from being in line with China’s pledge for a green BRI outcome.

Beijing has yet to establish the principles needed to guide environmentally sound investment abroad. Its export of dirty-energy technology undercuts the credits it gets for going green in its domestic energy initiatives. It will have to embrace responsible investment rules to fend off international criticism of its lack of sustainable growth and investment strategies.

China has also stepped up the pace of environmental innovation, with initiatives in carbon pricing, clean-energy finance and electric vehicles. In June 2017, it rolled out a pilot programme for green finance in five provinces to promote a USD 440 billion spending scheme on environmental protection projects. In November 2017, it launched the long-awaited carbon emissions trading scheme, which could become the world’s largest carbon market.

Chinese banks have started to issue BRI-related green bonds, the standard fixed-income instruments from which the proceeds are designated for sustainable projects. The Industrial and Commercial Bank of China issued its first One-Belt-One–Road Climate Bonds in Luxemburg in September 2017, raising more than USD 2 billion for financing and re-financing projects in low-carbon and low-emission transport, renewable energy, energy efficiency and water resources management. At the same time, China hosted an international Green Finance Forum in Beijing to discuss green finance tools and products, environmental risk analysis and how to enhance the social and environmental preferences of those investing in the BRI countries.

China’s green bond market is among the largest in the world, with its share in global green bond issuance rising from only 2.4% of the world total in 2015 to more than 23% in 2017, according to some estimates (exhibit 2). Other green financing tools and investment instruments are being developed, including green loans, green securities, green insurance, green banks and green funds. They share the common characteristics of: