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Accelerating a Green BRI by Aligning the Key Frameworks

A report on alignment and implementation of the two key frameworks for green finance in China’s Belt and Road Initiative (BRI) has been released by a partnership including the BRI International Green Development Coalition (BRIGC), Beijing Institute for Finance and Sustainability (BIFS), and ClientEarth, with support from the Green Finance & Development Center at FISF Fudan University.

The green development of the Belt and Road Initiative is making impressive progress. Only a few years ago, CCICED started its studies on this topic. Soon after, the Green Investment Principles for the Belt and Road (GIP) were launched, and the BRIGC was established. In the past years, President Xi has referenced BRIGC and the GIP in his speeches multiple times, and in 2021 he personally announced China’s decision to no longer build coal-fired power plants overseas, and step up investments in renewable energy.

The two new frameworks which have been developed include the Green Development Guidance for BRI projects (also known as the ‘green light system’), advanced by BRIGC and partners; and the Green Investment Principles, established by the China Green Finance Committee and the City of London. Both initiatives kept moving at full speed throughout the pandemic, because it is clear that post-pandemic recovery and sustainable development are top priorities for BRI countries.

The report sheds light on the implementation status, next priorities and coordination potential between the two frameworks. It is based on the outcomes of two Training Workshops on BRI Green Finance and Environmental Management and two Symposiums on Synergizing BRI Green Investment Principles (GIP) and Green Development Guidance (GDG), co-hosted by the report contributors in the course of 2021.

With wide participation from relevant authorities, financial institutions, enterprises and industry associations, these activities helped build capacity, and strengthened coordination between financial institutions and environmental authorities. Key topics were covered, including aligning green investment and financing instruments and standards, and addressing environmental and climate challenges. The activities were all part of the year-long project “Harmonisation and Capacity Building for Green Finance in Belt and Road Investments”, funded by the UK Partnership for Accelerated Carbon Transition (UK PACT).

The report compares the GDG and GIP, and finds that the two initiatives are well aligned and highly complementary. They both provided tools and green solutions for the BRI projects and supported the decision-making of relevant authorities in guiding green overseas investment cooperation.. Synergies can be further promoted between the two. The two frameworks equip both China and other BRI countries with important means to enhance environmental management in investments, and support their green and low-carbon transition.

The report also makes recommendations towards their further implementation. For example, further development of practical tools, such as on how to conduct information disclosure and public participation, as well as increased capacity building with financial institutions and the authorities in recipient countries, and continued collaboration between the two secretariats to ensure ongoing alignment between the two initiatives.

As China and a growing number of BRI countries announced their carbon neutrality targets, green finance has evolved from ‘good to have’ to ‘must have’ in the development of BRI. Against this backdrop, BRI development will bring about many green investment opportunities. Financial institutions and investors should shift their focuses from environmental and climate risk prevention to risks and opportunities, seizing the development opportunities arising from green investment and climate transition. This report, produced in such a context, is a comparative analysis of GDG and GIP. It points out that with similar objectives and goals, both aim to support financial institutions and investors through different approaches to manage environmental and climate risks, reduce carbon intensive and polluting investments, refrain from coal investments, and ramp up green investments,said Ma Jun, Advisor of the BRIGC Advisory Committee, Chairman of Green Finance Committee of China Society of Finance and Banking, President of Beijing Institute of Finance and Sustainability.

“At present, promoting post-pandemic green recovery and low-carbon transition has become the core concern of the BRI countries. Channeling green investment is one of the most effective ways to promote the green and low-carbon development of the Belt and Road Initiative. This report compares and analyzes the similarities and complementarities between the Green Development Guidance for BRI Projects (GDG) and the Green Investment Principles for the Belt and Road (GIP), and proposes recommendations regarding their further alignment and cooperation. GDG and GIP share many commonalities in terms of policy guidance, scope of application and technical approaches, etc. It is expected that by taking full advantage of the role of BRIGC and the GIP, the two frameworks can form synergy with each other and provide momentum to the BRI green investment and financing,” said Li Yonghong, Deputy Director General, Foreign Environmental Cooperation Center (FECO), MEE.

“It was an absolute pleasure to work on this report together with a highly motivated and competent team. Through deep engagement with Chinese and international financial institutions, as well as government stakeholders in various workshops and interviews, we were able to develop relevant suggestions to further support the development of these two fundamental frameworks for greening finance in the BRI. I was particularly excited about the active interest of financial institutions how to continue to reduce environmental and social risks through better governance and impact assessments, while also becoming better at identifying green project opportunities,” said Christoph NEDOPIL WANG, Director of Green Finance & Development Center, Associate Professor of Fudan University.

“We are extremely delighted to see China’s stakeholders actively making transition towards green and low-carbon investment. Following President Xi’s pledge to stop building coal-fired power projects abroad, the focus is now on rapidly stepping up on renewable energy deployment. Building on the successful collaboration through a series of workshops held in 2021, the alignment and collaboration between the two key frameworks will continue to provide relevant authorities, financial institutions, and developers with important tools to accelerate green finance and improve environmental performance. We are particularly eager to further develop practical tools on environmental information disclosure and public participation to keep strengthening environmental risk management for a green and low-carbon BRI,” said Dimitri de Boer, Chief Representative, China Office, ClientEarth.

 

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