The theme of China's active leadership in green investment in the context of the Belt and Road Initiative's ESG development has far-reaching significance and broad prospects for development.
In the course of the Belt and Road Initiative, China has been playing a leading role by virtue of its strong influence and proactive actions to integrate the concept of ESG (Environmental, Social and Governance) into the Initiative and to vigorously promote the vigorous development of green investment. This leadership has had many positive and significant impacts.
The green investment under ESG development led by China in the Belt and Road Initiative not only further strengthens the close economic cooperation between China and the countries along the route, and promotes the interconnection of trade and investment, but also demonstrates the responsibility of a responsible big country in the arena of global sustainable development, and sets a good example for the world to move towards a sustainable future together. The
Fundamental Impacts of ESG
Examined from the environmental (E) dimension, green investment has opened the door to sustainable development for countries along the route. The extensive development of renewable energy projects, such as the large-scale application of clean energy sources like wind, solar and hydro, has been strongly promoted.
Energy efficiency has been significantly improved, and traditional industries have realized energy conservation and emission reduction through technological innovation and transformation. Environmental protection has been strengthened, and ecological restoration projects have been launched to actively treat and restore damaged ecosystems.
This series of initiatives not only helps reduce greenhouse gas emissions in the countries along the route, but also contributes a key force at the global level to address the increasingly severe challenge of climate change.
In the social (S) sector, the role of green investment is also not to be underestimated. It creates a large number of jobs, both in the construction and operation of renewable energy projects and the expansion of related industrial chains, providing stable jobs for local residents.
This not only raises the income level of residents, but also improves their quality of life. At the same time, green investment promotes social equity and inclusive development, enabling more people to share the fruits of development.
In terms of education, healthcare and other social infrastructure construction, the investment of funds has been strengthened, laying a solid foundation for upgrading the level of social development in countries along the route.
At the governance (G) level, China's leadership has prompted countries along the route to continuously establish sound corporate governance mechanisms. This means that enterprises are paying more attention to transparency and compliance in their operations, following international standards and best practices, thus promoting sustainable business practices.
Good corporate governance helps to attract more investment, enhance the competitiveness and reputation of enterprises, and provide for the long-term stable development of the economy.
“The development of the Belt and Road Initiative
“Since it was proposed in 2013, the Belt and Road Initiative has achieved fruitful results, covering many areas such as infrastructure connectivity, trade and investment facilitation, and humanistic exchanges. Numerous major projects have been successfully pushed forward, such as the China-Laos Railway and the China-Europe liner, bringing tangible benefits to the countries along the route and promoting the prosperity and development of the regional economy.
“The Seven Principles of Green Investment in the Belt and Road Initiative
“The Belt and Road Green Investment Principles set out seven principle initiatives at the strategic, operational and innovative levels. These initiatives are to be voluntarily adopted and implemented by global financial institutions and enterprises participating in Belt and Road investments.
Principle 1: Integrate Sustainability into Corporate Governance
Commit to integrate sustainability into corporate strategy and culture. The board of directors and senior management of the institution will pay close attention to the risks and opportunities related to sustainability and establish an effective management system.
At the same time, professional staff will be assigned to identify, analyze and manage relevant risks and opportunities, and pay close attention to the potential climate, environmental and social impacts of the institution's investment and business activities in the countries along the “Belt and Road”.
Principle 2: Fully understand ESG risks
Better understand the social, cultural and environmental standards, laws and regulations in the industry and in the host country. Incorporate environmental, social and governance (ESG) factors into the decision-making process of the organization, carry out in-depth environmental and social due diligence, and, if necessary, formulate risk prevention and management programs with the support of third-party institutions.
Principle 3: Fully disclose environmental information
Carefully analyze the environmental impact of its own investment operations, including energy consumption, greenhouse gas emissions, pollutant emissions, water resource utilization and forest degradation, and actively explore how to apply environmental stress tests in investment decisions.
Continuously improve and refine our disclosure of environmental and climate-related information in accordance with the recommendations of the Task Force on Climate-related Financial Disclosure (TCFD).
Principle 4: Strengthen Communication with Stakeholders
A stakeholder information sharing mechanism will be established to enhance effective communication among multiple stakeholders, including government departments, environmental organizations, the media, local communities, and civil society organizations. A conflict resolution mechanism will also be established to resolve disputes with communities, supply chains and customers in a timely and appropriate manner.
Principle 5: Fully utilize green financial instruments
We will more proactively utilize green financial tools such as green bonds, green asset-backed securities (ABS), emission rights financing and green investment funds to finance green projects. We will also actively explore the use of green insurance.
For example, through the flexible use of environmental liability insurance, catastrophe insurance and green building insurance, we will effectively avoid environmental risks in project operation and asset management.
Principle 6: Adopt green supply chain management
Incorporate ESG factors into supply chain management, and learn and apply good international practices such as greenhouse gas emission accounting methods, rational use of water resources, supplier “white lists”, performance indicators, information disclosure and data sharing, etc. in their investment, procurement and operation activities.
Principle 7: Capacity building through multi-party cooperation
Set up special funds and assign professional staff to work with multilateral international organizations, research institutions and think tanks to enhance their professional capacity in policy implementation, system construction, tool development and other areas covered by the principles.
“The Case for Green Investment in the Belt and Road Initiative
“The Belt and Road Initiative has achieved results in promoting green energy development and sustainable development, as well as cooperation between China and countries along the route in the field of green investment. These projects not only bring environmental benefits, but also promote local economic development and social progress to a certain extent.
Case 1: Zanatas 100 MW Wind Power Project in Kazakhstan
The project is jointly constructed and operated by China Power International Holding Company and a local enterprise in Kazakhstan, and the first turbines were connected to the grid in September 2020, and in October 2020, the project received a total financing support of USD 95.3 million from the European Bank for Reconstruction and Development (EBRD), the Asian Infrastructure Investment Bank (AIIB), Industrial and Commercial Bank of China (ICBC), and the Green Climate Fund (GCF).
This is the first EBRD wind project and the largest in Kazakhstan; the first renewable energy project in Kazakhstan to be financed by a commercial bank (Industrial and Commercial Bank of China (ICBC)); and the first attempt to finance a wind project through a project finance structure in Kazakhstan.
It is expected to reduce carbon dioxide emissions by 262,000 tons per year, which will help Kazakhstan reach its green emission reduction targets and provide green jobs for local people, especially women.
Case 2: Moraghakanda Irrigation Project, Sri Lanka
This is the largest water conservancy project in Sri Lanka, which started construction in 2012, and was constructed by Sinohydro Group International Engineering Co.
The project site was formerly a civil war conflict area and a dry area lacking irrigation water and drinking water. China Development Bank gave full play to its advantage of large-value medium- and long-term loans, and it took only half a year to realize the loan commitment, contract signing and loan disbursement.
The project has brought many benefits to Sri Lanka, such as providing irrigation water to rice-growing areas, which account for about 24% of the country's production, boosting the development of the local agriculture, fishery and electricity industries, increasing employment and income, and improving people's livelihoods; and also improving the ecological environment by regulating water resources, which provides Sri Lanka with the basic conditions to cope with extreme weather conditions.
In 2019, the project was selected as the best case in the first global collection of poverty reduction cases.
Case 3: Ceni Wind Power Project in Croatia
The project, invested, constructed and operated by Northern International Cooperation Co Ltd, started construction in November 2018 and was officially connected to the grid in December 2021 to generate electricity.
The project is equipped with 39 wind turbines with a single capacity of 4 MW, with a total installed capacity of 156 MW and an annual power generation capacity of about 530 million kWh, which can meet the electricity demand of at least 100,000 households and is equivalent to an annual reduction of 460,000 tons of carbon dioxide.
By the end of 2023, the project's historical cumulative total power generation capacity will reach 876 million kWh, which will make an important contribution to the reduction of electricity imports and the promotion of low-carbon development in Croatia, and is praised by the Croatian Prime Minister as a model project for the cooperation between the European Union and China in the field of green energy.
Case 4: Thrace Wind Power Project in Greece
This is the first wind power project invested by China in Greece, with an annual generation capacity of about 160 million kWh of green power, which can reduce carbon dioxide emissions by about 210,000 tons per year, equivalent to planting 360,000 trees per year.
On average, one out of every 330-odd lights in Greece is lit by this project. The project has promoted Sino-Greek civil friendship, and during the Greek forest fire, the Chinese and Greek teams worked together to rescue and protect the wind farm.
“Future Development Opportunities for Green Investment in the Belt and Road Initiative
China is in the early stage of the Industrial Revolution 4.0, which will rapidly eliminate backward production capacity in large quantities, while most developing countries along the Belt and Road are in the middle of Industrial 1.0 and 2.0.
China can bring its excess capacity, traditional industrial equipment and technologies in the process of upgrading to these countries by way of export and cooperation, helping them achieve initial industrialization in line with their own development needs, which is also supported and encouraged by the United Nations Industrial Development Organization (UNIDO).
With the advancement of the carbon neutral goal, green building standards, green manufacturing standards, green product standards, green financial standards and other emerging things need standard support. While some developing countries have almost no clear building standards for infrastructure construction, China's green standards “going out” will bring unlimited possibilities.
Under the Belt and Road Initiative, there are opportunities for cooperation in green infrastructure, energy, transportation, industry, trade, finance, science and technology, standards, climate change and other key areas of green investment.
For example, in the area of green energy, we can deepen cooperation on clean energy, promote international cooperation on green and low-carbon transformation of energy, and carry out joint research and exchanges and training;
In the area of green transportation, international cooperation can be strengthened to promote the low-carbon development of international maritime transport and aviation, and to promote new energy transportation and intelligent transportation solutions;
In the area of green finance, relevant voluntary guidelines and experiences can be promoted under the framework of multilateral cooperation, and financial institutions can be encouraged to implement green investment principles.
The future development of green investment in the “Belt and Road” has both opportunities and challenges, and requires the joint efforts of all parties to promote the sustainable development of green investment and realize a win-win situation between economic development and environmental protection through enhanced cooperation, technological innovation and policy support.
Author: Mr. Li Sike
CEO of Pinjob Education, signed writer of Tsinghua University Publishing and Mechanical Industry Press, ESG expert of China Association for the Promotion of Science and Technology Finance, CFA, CFAESG, FRM, RFP holder, the first person in mainland China to obtain the CFA ESG investment certificate, with more than 5000 hours of cumulative lectures, 6,000+ trainees, and 1,200+ hours of cumulative online lectures. Serving corporate clients: Morgan Stanley, HSBC, Westdeutsche Bank, Bank of China (national head office), Industrial and Commercial Bank of China (national head office), Construction Bank of China (national head office), Agricultural Bank of China, Postal Savings Bank of China, Pacific Insurance Group, China Renaissance Capital, and Yizhuang International.
