China and the United Kingdom are supporting the establishment of an investor alliance to further encourage financial flows into environmentally friendly energy and infrastructure projects within the area covered by the Belt and Road Initiative, China Daily has learned.
Led by the City of London Corporation, the Belt and Road Investor Alliance is expected to be unveiled in Beijing on Monday at a green finance conference co-hosted by the two countries' government sector organizations, alongside a host of other green finance policy initiatives that will be announced by the UK-China Green Finance Taskforce.
The alliance is also looking to develop a uniformed set of standards to help member organizations invest in projects, and develop voluntary guidelines for Belt and Road projects to better-manage their environmental risks and making the projects more attractive to investors.
"China and the UK are recognized by the international community as leaders in green finance development," said Ma Jun, chief economist of the People's Bank of China's Research Bureau. "China has taken a top-down approach (on green finance). The UK has leveraged the strong green preference of institutional investors to develop its green finance market.
"By combining the strength of both approaches, I believe China and the UK can jointly develop a more effective model for green finance development."
Monday's conference is co-hosted by the Green Finance Committee of China Society for Finance and Banking and the Green Finance Initiative of the City of London. It will be attended by high-level British and Chinese government officials, including Chen Yulu, deputy governor at the People's Bank of China, and Barbara Woodward, Britain's ambassador to China.
Other policy recommendations to be presented at the conference include the harmonization of green bond standards, the setting of new rules for listed companies and bond issuers to disclose environmental impact information, scaling-up green capital flows, encouraging rating agencies and investors to increasingly consider environmental risks for investments, and others.
Green finance became popular recently among investors seeking long-term stability, because certified green infrastructure and energy projects adhere to more strict future climate-friendly regulations, and therefore reduce climate policy risks for investors.
China is already a leader in green finance, having issued $36 billion of green bonds in 2016, which was almost 40 percent of the $81 billion of green bonds issued globally.
Meanwhile, the potential to grow China's green bond market goes much further. According to People's Bank of China estimates, China needs at least 2 trillion yuan ($305 billion) of green investment annually during the next five years to promote environmental protection and reduce pollution.
Roger Gifford, chairman of the City of London's Green Finance Initiative, said his team has been encouraged to see practical solutions being continually developed by public sector parties and industry practitioners in both countries.
"It's our role, together with UK government, Bank of England to ultimately drive the green economic growth."
Meanwhile, British and Chinese private-sector investors and financial institutions are already jointly developing frameworks to assess and disclose risks relating to investments' environmental impact.
"It won't be a quick process, but, ultimately, it will happen, because investors need to understand risk (to their investments), and they can only do that with greater transparency and consistency," said Daniel Klier, global head of sustainable finance, at HSBC.