The Paulson Institute releases new study on the far-reaching impacts of fintech on sustainable development
CHICAGO—Today, the Paulson Institute and the Research Center for Green Finance Development of Tsinghua University release the study, Fintech Facilitates the Sustainable Development of Green Finance in China. This report is the result of a year-long study to explore how fintech can promote sustainability in China and offers important recommendations for policymakers, regulators, and businesses as a result. The report highlights four Chinese entities using fintech applications to promote sustainable development. China has been a global leader in the application—and adoption—of fintech so it is a natural transition to explore its use in promoting a green agenda.
The momentum of green finance is clear, and the report acknowledges that the adoption of fintech in China will dramatically change the ways in which financial services interact with consumers in the future. For example, in 2018, mobile payment transaction volumes in China totaled $41.5 trillion. And according to a recent survey led by the Research Center for Green Finance Development of Tsinghua University, the development of China’s green finance is inextricably linked to the application of fintech. At the moment, there are more than 60 organizations in China, including financial institutions, research institutes, and technical service providers, who engage in using fintech to provide services for green finance businesses nationwide.
In 2017, the Chinese government announced the creation of five green finance pilot zones to explore and test ideas for green finance. Zhejiang province’s Huzhou city was, in particular, designated as a pilot zone to focus on fintech and its applications for sustainability. Three of the four studies featured are based in Huzhou; the other is in Ningbo, also in Zhejiang province.
Fintech helps to improve efficiency and transparency in the financial system so can help address financing gaps in the market for sustainability. In one case study, the launch of the One-Stop Service Platform in Huzhou City has helped more than 13,000 green small and medium-sized enterprises (SMEs) obtain lines of credit for their green projects. In another, the People’s Insurance Company of China Property and Casualty (PICC P&C)’s Remote Damage Assessment and Claim Settlement Platform has developed methods to help expedite claims in as fast as four days after a catastrophe.
In the third case study, the Huzhou branch of the People’s Bank of China (PBOC) launched a Green Finance Information Management System that connects all 36 banks in the Huzhou jurisdiction with the bank. As a result, every green transaction is reported in real-time to the local branch of the PBOC which allows for consolidated, accurate data collection and management as well as tracks green lending information from these Huzhou based banks.
The fourth case study on the Green Credit Management System of Huzhou Bank calls attention to the lack of access to reliable and credible information about the risks related to investing in green projects. The platform uses fintech to identify, evaluate and classify green projects to provide more accurate information for potential investors.
“The cases highlighted in this study show how fintech could be harnessed to develop innovative green finance tools. These tools can be scaled across China, but also in countries—particularly emerging markets—who are adopting fintech as well as seeking means to finance their sustainability goals. Green finance and the environment will clearly benefit from these new innovative projects,” says Deborah Lehr, Vice Chairman and Executive Director of the Paulson Institute.
As a global leader in green finance and fintech, China is at the forefront of testing fintech-driven green finance innovation, sustainable development initiatives, and low-carbon behavioral transition. “Fintech can effectively improve green identification, lower the cost of green certification, and reduce the cost of financing small-medium businesses and green consumption as well as the cost of trading green assets. The market potential is tremendous,” according to Dr. Ma Jun, Chairman of the Green Finance Committee of the China Society for Finance and Banking and Director of the Research Center for Green Finance Development at Tsinghua University.
But also opening and expanding access, particularly to those in rural areas as well as small and medium-sized industries traditionally challenged in accessing credit, makes fintech so powerful. “Working hand in hand with Chinese financial institutions to provide innovative fintech products, we can build a comprehensive system that relies on big data, cloud computing, and AI technologies to achieve green finance goals,” says Liu Jialong, Researcher of Green Finance Committee of China Society for Finance and Banking and Intermediate Researcher of Research Center for Green Finance Development at Tsinghua University.
Yet, the pursuit of fintech as a solution and tool for a low-carbon future is not without challenges. To accomplish this, the research recommends four areas to drive the use of fintech solutions in China, through building capacity, supporting innovative business models and industrial deployment coupled with political will and sound regulatory policies as critical components to full implementation. According to Gracie Sun, Senior Advisor of the Paulson Institute and Managing Director of Green Finance Center of the Paulson Institute, “China is aggressively pushing for the development of green fintech. However, included among the most important challenges facing policymakers are devising ways to identify environmental risks and growth opportunities in the financial sector. Policymakers also need to figure out how to promote the long-term development of green finance, maximize the benefits of fintech, and minimize the potential risks of emerging technologies and innovative products to the financial system.”
The momentum of fintech integration into the global financial systems and its growing adoption means that it can be a potential platform for enabling green development. The four case studies in this report provide insights into how this might be achieved.
To learn more about the report, please visit paulsoninstitute.org/greenfinance.
The English version of Fintech Facilitates the Sustainable Development of Green Finance is forthcoming.
About the Paulson Institute
The Paulson Institute is a non-partisan, independent, privately funded “think and do tank” not supported by or connected to any government. It is dedicated to fostering a US-China relationship that serves to maintain global order in a rapidly evolving world. The Green Finance Center, established in 2018, supports the greening of the financial system by moving green finance from a philanthropic niche to the mainstream of markets—with the recognition that China must be a key role player in this movement.
About the Research Centre for Green Finance Development
The Research Centre for Green Finance Development (GFD) was officially established in December 2018 by the National Institute of Financial Research at Tsinghua University. The GFD Centre, previously working under the Center for Finance and Development, is dedicated to building a world-leading think-tank for policy research, toolkit innovation, capacity building and international collaboration in the field of green finance.
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