The Paulson Institute and the Center for Finance and Development of Tsinghua University National Institute of Financial Research co-hosted a roundtable discussion on Belt & Road and Green Finance in Beijing, which is one of a series of roundtable discussions on green finance. The roundtable was focused on how to improve the “greenness” of investment in the Belt & Road initiative, and how to mobilize international capital to invest in the Belt & Road regions.
Henry M. Paulson, Jr., Chairman of the Paulson Institute and former U.S. Secretary of the Treasury, participated in the discussion and delivered a keynote speech. The discussion was moderated by Ma Jun, Director of the Center for Finance and Development and former Chief Economist at the Research Bureau of the People’s Bank of China (PBOC), and Deborah Lehr, Vice Chairman of the Paulson Institute, and attended by over 30 senior officials and financial experts from the PBOC, the Ministry of Environment Protection (MEP), the Green Finance Committee of China Society for Finance and Banking, China Development Bank, Silk Road Fund, CITIC Group Corporation, the UNEP Inquiry, the City of London, the British Embassy in China and other international financial institutions.
In his welcoming remarks, Yang Bin, Vice President of Tsinghua University, noted that, in recent years, China has led the world in the development of “Fintech” and “green finance”. In the area of green finance, China is the first country to establish a “relatively complete” green finance policy system and is now the world’s largest green bond market. Chinese local governments have set up dozens of green development funds and launched five pilot zones to promote green finance. The Belt & Road initiative proposed by China will become one of the key engines of global economic, trade and investment growth in the coming decades by promoting investment in a large number of infrastructure projects in the Belt & Road region.
“It wasn’t so long ago that the idea of green investments seemed a bit impractical, if not idealistic. Today, however, investors and policymakers around the globe are recognizing that green investments are downright prudent and even essential,” Paulson said. “Rather, the question is how we can design a more effective global green market infrastructure. A big part of the answer is that governments need to create conditions that encourage private green investments. Countries should adopt policies that reduce the price of low-carbon investments.” Paulson added that China also issued government guidelines that outline an ambitious road map for creating green lending, environmental stress tests and benchmarks to ensure credibility of green investments, disclosure requirements and innovative public private partnerships. China provides a useful example and is making significant progress in its green finance initiatives. Moving forward, China has an opportunity to “export green finance” through its Belt & Road initiative. And it’s along the countries participating in the Belt & Road initiative that the future of the global green market will be shaped. The Paulson Institute is pleased to be a part of this process. And as it has been seen in China, it is possible to address our planet’s most pressing environmental challenges while still maintaining economic growth.
Ma Jun said that, with potential demand for infrastructure investment amounting to over one trillion U.S. dollars per year in the Belt & Road region, it is impossible to simply rely on funding from China. In order to successfully implement the Belt & Road initiative, we must mobilize global financial resources and, in particular, the international financial centers such as Hong Kong, New York and London. In addition, a range of financial products and risk management tools should be developed through international cooperation between governments and financial institutions to transform the Belt & Road infrastructure assets into financial products acceptable to global institutional investors, so that global capital can be effectively involved in the Belt & Road investment. He also noted that, although the “greening” of the Belt & Road initiative has become a consensus, it is still a challenge on how to proceed and get it right. The Environmental Risk Management Initiative for China’s Overseas Investment jointly issued by the China Green Finance Committee and other six industrial associations is a starting point for promoting green investment in the Belt & Road regions. However, in the future, it is necessary to mobilize the United States, the United Kingdom and international organizations to work together for the development of guidelines on greening the Belt & Road initiative that can be accepted by global investors.
Lehr remarked that in a short space of time, China has become a global leader in green finance. It is clearly a political priority: President Xi mentioned it in his work report at the 19th CPC national congress, it was a key centerpiece of China’s presidency of the G20, and will be a part of the Belt & Road initiative. China could become an “exporter of green finance” so it is in all of our interest that China get “it right.” The Paulson Institute looks forward to working with Dr. Ma Jun and Tsinghua University National Institute of Financial Research as they develop recommendations and policies on green finance for financial and other institutions participating in the Belt & Road initiative.
The participants had a substantive discussion on the themes of promoting greenness in the Belt & Road and motivating international financial centers and international capital for Belt & Road investment. The experts agreed that it is necessary to develop a definition of and principles for green Belt & Road investment; governments and financial institutions should establish and strengthen coordination mechanisms to fully share information on the Belt & Road projects; international financial centers and international financial institutions should develop appropriate financial products such as political risk insurance and improve the foreign exchange hedging market to help to advance the Belt & Road initiative.
A joint research study with aim to promote a Belt & Road environmental risk management initiative acceptable by global institutional investors was proposed during the meeting, the representatives from GFC, City of London Green Finance Initiative, Paulson Institute, UNEP Inquiry and MEP agreed to support.
The roundtable is the first academic event since Ma Jun’s transition as Director of the newly established Finance and Development Research Center at the Tsinghua National Institute of Financial Research. Oriented towards solving practical problems related to economy and finance, the Center aims to become an important think tank in the financial field by serving the purpose of financial decision-making and to play an active role in promoting international exchanges in the economic and financial fields. In addition to independent research on medium and long-term issues, the Center is also entrusted with research projects by government and financial regulatory authorities as well as financial institutions to actively participate in and support the PBOC’s research on green finance, G20, monetary policy and financial risks. In the coming years, the Center will focus its research on financial risks, monetary policy, green finance, the Belt & Road initiative and inclusive finance.