Green financing might be the best way to cut carbon emissions
Zhang He

Green financing could play a key part in reducing greenhouse gas emissions as the countries around the world are trying to rein in global temperature rise and meet the targets set by Paris agreement.

Green financing is investment that leads to increased investment in longer-term and sustainable projects, converting major sectors of the economy from using high carbon fuel to lower carbon energy such as electricity and bio-based fuels.

"It is very important to divert investments to green investment, so anything that is sustainable and helps to stop climate change. " said Clare Burgess, Partner of Clifford Chance, "There are billions of dollars from investors who are looking to invest in green financing instruments." 

The 126 countries involved in China's Belt and Road Initiative will have significant new infrastructure in the coming decade. These countries currently account for about 1/4 of global carbon emissions, but this is likely to rise significantly by 2050, according to a report by Tsinghua University Center for Finance and Development, Vivid Economics and the Climateworks Foundation. 

However, the emissions level could be cut dramatically if environmental criteria form part of investment decisions. "There are significant opportunities to switch investments in energy, transport, industry and buildings, so that those countries, along with the rest of the world, come down to a low-carbon trajectory." said Jason Eis, Executive director of Vivid Economics.

In 2018, China and the UK jointly published the Green Investment Principles for the Belt and Road to ensure the new infrastructure projects in BRI countries meet high environmental standards. Banks and other financial services are also working together on more green financial instrument to reduce the emissions from BRI projects. 

"Green bonds is the main one that is a global product that investors around the world are interested in buying. The country with the largest green bond issuance this year is China. We are seeing lots of issuance from the Chinese banks in particular. " said Clare Burgess.

China's green finance market has expanded steadily, with about  40 billion U.S. dollars-worth of green bonds issued last year, according to a report released by the People's Bank of China.