Belt and Road financiers to favour ‘greener’ and social projects
Financiers of China’s Belt and Road Initiative (BRI) have committed to funding environmentally and socially sustainable projects, expanding on the $100 billion worth of “green” BRI projects since 2013 when the initiative was launched.
In 2018, the Green Finance Committee (GFC) of the China Society for Finance and Banking, along with the City of London's Green Finance Initiative (GFI), published a set of guidelines for “green” BRI projects.
“Since then, the six major Chinese banks – Industrial and Commercial Bank of China (ICBC), China Construction Bank, Agricultural Bank of China, Bank of China, Export-Import Bank of China and China Development Bank – have signed agreements to follow the proposed guidelines,” said Ma Jun, the GFC chairman, in an exclusive interview with The Nation.
These six financial institutions are responsible for 80 per cent of all financial flows going into BRI projects from China, according to Ma, who is also the director of the Centre for Finance and Development under the Tsinghua National Institute of Financial Research.
These six major banks are part of a larger group, including 30 financial institutions around the world, that have agreed to the guidelines.
Hence, going forward, the Asean region and other developing economies around the world can expect BRI projects to place more importance on environmental, social and governance (ESG) issues, Ma said.
Currently, the value of BRI projects around the world which could be considered “pure green” projects by international sustainability standards stands at around US$100 billion, Ma said.
From 2013 to 2018, $737 billion of BRI-related capital flowed into the Asean region, according to research by the CIMB Asean Research Institute (CARI) titled “China’s Belt and Road Initiative and Southeast Asia”.
Of these Asean countries, Indonesia gained the largest BRI-related capital flows at $171 billion, followed by Vietnam with $152 billion, Cambodia $104 billion, Malaysia $98 billion and Singapore $70 billion. Behind them are Laos with $47 billion, Brunei $35 billion, Myanmar $27 billion, Thailand $24 billion and the Philippines $9 billion.
Among the key BRI-related projects in the region is phase one of the Bangkok-Nakhon Ratchasima railway, which was initiated in 2017 with an expected completion in 2021. The project is worth up to Bt179 billion, the research stated.
However, BRI projects that reach international sustainability standards only made up a small fraction of total BRI investments since 2013.
Financial institutions from Malaysia and Singapore have agreed to the BRI green finance guidelines. However, Thailand has yet to join the growing pack, Ma said.
The green finance expert suggested that in order to promote more “green” projects in Asean, local governments, financiers and other stakeholders will need to work together and create an ESG-friendly ecosystem that creates incentives for the construction of more sustainable projects.
Going forward, the guidelines will be developed into specific sets of tools for each economy and financier to follow, Ma said.
