Resolve to green the Belt and Road

China becoming more and more proactive in aligning its overseas investments with the Paris Agreement

The Chinese government issued a policy on July 16 encouraging Chinese businesses to integrate green development throughout the whole process of overseas investment and cooperation. The document, titled "Green Development Guidelines for Overseas Investment and Cooperation", was jointly issued by the Ministry of Commerce and the Ministry of Ecology and Environment. It is an excellent step to accelerate green development not only in China, but internationally.

The guidelines recommend that Chinese enterprises "follow international green rules and standards" in overseas activities, particularly in countries where local standards are insufficient. The guidelines encourage the practice of environmental impact assessments in accordance with internationally accepted standards－a clear move to promote green development. By including the three environmental aspects of pollution control, ecological protection and climate change, the guidelines break new ground by aligning Chinese overseas investment with the Paris Agreement.

The guidelines recommend that Chinese businesses support investments in solar, wind and other forms of clean energy. This is absolutely essential as the risks of climate change are becoming painfully obvious around the world, including in China. The likelihood of extreme weather including droughts, heat waves and floods, is greatly increased by climate change. All countries should stop building new high carbon infrastructure, and quickly start to reduce greenhouse gas emissions.

The guidelines also cover trade, by requiring companies to speed up integration with the global green supply chain, carry out green procurement and purchase environmentally friendly products and services. If implemented well, this could be a game-changer for the biodiversity on our planet, which continues to suffer heavily from deforestation.

The guidelines come at a time when the world hopes to recover after the novel coronavirus pandemic has left many economies struggling. By publishing the guidelines, China shows its willingness to play an important role in supporting sustainable development.

The guidelines are specifically addressed to some of the most important financial institutions: the China Development Bank, China Import-Export Bank and Sinosure, China's export credit agency. This policy gives a boost to their efforts to go green and helps to set their expectations that stricter measures are likely to follow. In fact, many of these financial institutions are already actively working on going green.

In June this year, the Belt and Road Initiative International Green Development Coalition, ClientEarth and the Beijing Institute of Finance and Sustainability conducted a two-day workshop on environmental and climate risk mitigation with the largest financial institutions in the Belt and Road Initiative. Although the process is not without difficulties, these institutions are developing key policies, such as categorization of projects based on environmental risks, requirements for environmental standards, impact assessments, third-party evaluations, information disclosure and public participation, grievance mechanisms, and even potential fossil fuel exclusion policies. They are also making rapid progress in developing green loans and bonds, backed by a strong push toward climate finance from the People's Bank of China, China's central bank.

Looking at current investment trends, we're already starting to see this transformation on the ground. According to the China Belt and Road Initiative Investment Report H1 2021 released by the International Institute for Green Finance, 2020 was the first year when renewable investments in the Belt and Road countries exceeded investments in coal, while in the first half of 2021, no coal-related financing went into the Belt and Road countries. For example, the Industrial and Commercial Bank of China pulled out of financing for a huge coal plant in Zimbabwe in June 2021, and China already supports the energy transition of many Belt and Road countries. This shift away from climate-harming projects makes economic sense, as electricity from new solar power is already up to five times cheaper than from new coal power.

We expect that this positive trend will continue, with China becoming more and more proactive in greening its overseas investments. The new guidelines allude to "relevant environmental protection requirements on overseas projects". These currently don't exist, which leads us to believe that they may be issued in the near future. Furthermore, in the run-up to the upcoming climate conference in Glasgow in November, we anticipate that China may announce further steps to make the Belt and Road Initiative even more climate-friendly. China's leadership on climate action and biodiversity protection is the key to the global green transition.

Dimitri de Boer is chief representative of ClientEarth's China office. Christoph Nedopil Wang is the founding director of the Green Belt and Road Initiative Center at the International Institute for Green Finance of the Central University for Finance and Economics in Beijing. The authors contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.