China is emerging as a leader in green finance say experts at Imperial talk

China is putting green finance at the heart of its development plans to grow a more sustainable economy and set an example to other countries.

The UK and China are the two key countries to develop green finance exports Professor Yao Wang Director General of the International Institute of Green Finance

This was the consensus of a talk hosted by the Business School, which examined how initiatives such as green insurance and environmental credit trading have shaped China’s progress to become a more ecologically sensitive and how this has impacted on the country’s businesses. Green finance refers to financial instruments and investments that help countries meet their environmental goals.

Dr Charles Donovan, Director of the Centre for Climate Finance & Investment at the Business School, (pictured) who organised the event said: “China’s growing position as a leader in the international green finance market highlights the importance of tackling climate change and the role that governments and businesses need to play in boosting the global green economy. The talk provided us with an ideal opportunity to showcase the important work the Business School is doing to address these issues.”

China's green policies

The talk was led by Professor Yao Wang, Director General of the International Institute of Green Finance at the Central University of Finance and Economics, Beijing. Professor Wang looked back over the past decade to examine how green finance policies have shaped China’s national strategy up to the present day. She explained the design of the green financial system in China including green funds, green insurance, green credit and environmental credit trading.

She argued how China should use its emerging position as a green finance leader to strengthen its trade arrangements with other countries. Talking about the importance of China maintaining an economic dialogue with the UK she said: “The UK and China are the two key countries to develop green finance exports.” She explained how China and the EU are also working on how to “harmonize green bond standards” to ensure there was a regulatory framework for green bonds as part of China’s international trade agreements.

Switching to cleaner forms of energy

Outlining China’s strategy framework, Professor Wang gave an overview of the country’s give green finance pilot zones, which were launched last year in five regions across the country, to boost local environmental projects. Backed by the Chinese government and by local businesses, these regions will focus on using different aspects of green finance to solve particular challenges such as switching to cleaner forms of energy or developing new ways to fund local projects through green bonds or collaborations between the public and private sector.

She explained how many Chinese banks are providing credit support to green industries. Green bonds are becoming more prominent in strengthening the overall market structure and providing excellent value for long-term buyers. Professor Wang gave examples of green policies which the government is looking to implement including mandatory pollution liability insurance, green building insurance, water trading schemes and environmental credit trading.

Although China is making rapid progress to meeting its environmental economic goals, there is still more work to be done Professor Wang said. “The lack of legislation is still an obstacle for getting eco-projects rolled out at both a national and local level. There is also a question about how much financial information should be disclosed to potential investors who want to benefit from China’s green finance market.”

Later, her colleague Professor Yi-Chen Shi, outlined two specific areas of research within green finance: environmental stress testing and green stock indices, before opening up to the floor for audience questions. The conversation addressed a broad range of issues from the need for a clear universal definition of what green finance is to how businesses should portray their green credentials.