China greening the BRI with help from London

The City of London and China's central bank jointly launched an initiative in London on Friday to encourage banks to finance environmentally friendly projects along the Belt and Road trade routes.

The initiative is said to be critical as many new infrastructure and power projects along the region covered by the Belt and Road Initiative remain in the planning stage and ensuring climate friendliness will reap benefits for decades to come.

Known as the Green Investment Principles, or GIP, the initiative is also the latest milestone to help realize the vision of greening the Belt and Road, which President Xi Jinping proposed at the 2017 Belt and Road Forum for International Cooperation in Beijing.

The GIP is a collection of guidelines that ask banks to lend to environmentally friendly infrastructure projects, to finance projects through green finance tools such as green bonds, and to actively communicate their green investments to industry partners and the wider public.

"It will increase the transparency for Belt and Road Initiative's environmental sustainability," said Roger Gifford, chairman of the City of London's green finance initiative.

"We want to encourage banks to finance green projects, and by strong implication discourage financing into less environmentally friendly projects. Banks who commit to the principles will also experience a reputational benefit especially as shareholders, media and the public are increasingly concerned about green practices."

Proposed by President Xi Jinping in 2013, the Belt and Road Initiative, also known as BRI, advocates improved connectivity of infrastructure, trade, ideas and knowledge along global trade routes.

Since 2013, more than 4,500 BRI projects have been financed globally, with an expected total project value exceeding $5 trillion, according to data gathered by the City of London and the People's Bank of China's research arm.

"The principles are to ensure that environmental consciousness, climate resilience, and social inclusiveness are built into new investment projects in the Belt and Road," said Ma Jun, chairman of the China Green Finance Committee, an organization under the People's Bank of China.

"A part of the urgency comes from the fact that carbon is locked up in the lifetime of projects. Let's say, if BRI projects designed and constructed over the next five years are not designed in an environmentally friendly way, then in the next 50 years they will emit a lot of carbon," Ma said.

"Encouraging banks and other players to follow the GIP is a step to ensure that the UN sustainable development goals and the Paris Agreement are met," said Ma.

Already many international groups are supporting China's efforts to ensure environmental sustainability of BRI projects.

The UN signed an agreement with China to promote the sustainable development of the BRI. The World Resources Institute has urged China to share its own climate mitigation experiences with other emerging economies and help other Belt and Road countries make their financial systems green.

To hold banks and other financial players accountable to their commitment under the GIP, the British and Chinese governments will jointly establish a UK-China Green Finance Centre in the first quarter of 2019 to actively monitor BRI green finance progress.

The centre will also work with banks to identify and execute green finance opportunities along the BRI and publish best practice case studies to create a role model effect.

Originally announced in March this year, the center is now in its preparation phrase, with 400,000 pounds ($510,000) of funding from the UK government.

The GIP is created through a year-long discussion between banks and government representatives from China and the UK, and received input from notable international organizations including the World Economic Forum, the United Nations-supported Principles for Responsible Investment and the Paulson Institute.