Beijing's original green finance issue is set to get boost in Hamburg

Global policy coordination on green finance development is expected to get a boost at the G20 Global Leaders Summit in Hamburg this week, continuing the momentum started by China's leadership at the summit in Hangzhou last year.

This year's summit shines a spotlight on green finance, which seeks to channel large-scale funding into environmentally sustainable and clean energy projects, which in turn create long-term robust growth. Green finance was put on the G20 agenda by China for the first time last year.

"Green finance is an increasingly hot topic globally and I expect the G20 to put it at the very front of its agenda," said Wang Yao, deputy secretary-general of the Green Finance Committee, which is led by China's central bank, the People's Bank of China.

"I hope the outcome (at the summit) will be an increased global engagement by both public and private actors. Only with broad involvement is it possible to create a green financial system capable of improving the global environment," said Wang.

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 is far larger. Ma Jun, PBOC's research bureau chief economist, said in March that China needs at least 2 trillion yuan ($290.4 billion) of green investment annually over the next five years to promote environmental protection and reduce pollution.

But green finance development globally has also encountered challenges including the lack of universal standards for green financial products, and the lack of good quality and transparent data from companies about their green projects.

Consequently, a G20 green finance study group has developed a voluntary framework for companies to disclose climate-related information in their financial report filings, to be presented to the G20 leaders this week. China and the United Kingdom's central banks chaired the study group this year at the invitation of Germany.

Roger Gifford, chairman of the City of London's Green Finance Initiative, said he hopes G20 leaders will endorse the study group's recommendations when they meet in Hamburg.

"This information will increase the transparency of the green attributes of companies and help investors to feel more confident about their investment," said Gifford.

Gifford's views are echoed by Daniel Klier, HSBC's group head of strategy and global head of sustainable finance, who added that it is also important for governments to work with banks and investors to create the right regulatory incentives to unlock private-sector capital for funding green investment.

Meanwhile, policy-makers are collaborating in harmonizing green bond standards, regulatory frameworks and encouraging green finance market transparency.