Green Credit Guidelines Going out: Case studies on Chinese Bank Invest in Overseas Project

日期:

This study presents seven case studies of Chinese bank financing for overseas investments and analyzes these transactions to determine the extent to which banks have implemented Article 21 of the Green Credit Guidelines, China’s innovative sustainable finance policy. Evidence suggests that widespread problems in bank compliance with Article 21 of the GCG exist. The case studies indicate that Chinese banks lack transparency and sufficient methods of engaging with the public, practices which reduce their access to beneficial information and input that could improve their GCG compliance, and the report concludes with several recommendations, including one that Chinese embassies abroad take a proactive role to ensure compliance with Article 21 of the GCG.

Read the Full Report:

Going Out but Going Green?—Assessing the Implementation of China’s Green Credit Guidelines Overseas

Chinese Version:

Green Credit Guidelines going out: Case studies on Chinese Bank Invest in overseas Project

Introduction In May, G:HUB published the Chinese version of the report Green Credit Guidelines going out: Case studies on Chinese Bank Invest in overseas Project. This study presents 7 cases of Chinese bank financing for overseas investment and concludes with a range of recommendations to ensure the compliance with the Green Credit Guidelines. The study was originally conducted by FOE in English. G:HUB produced a Chinese version with a Chinese context for domestic policy advocacy. Based on the cases, G:HUB organized a 23ppl key stakeholder roundtable in Beijing to launch the study. The representatives from PBOC, CBRC, NGOs and banks attended. Individual interviews were conducted to enhance the dialogue.

Executive Summary 

This study presents seven case studies of Chinese bank financing for overseas investments: China Development Bank's financing of the Stanari coal project in Bosnia and Herzegovina, the Golden Veroleum palm oil plantation in Liberia and Asia Pulp and Paper in Indonesia, and Industrial and Commercial Bank of China Ltd.'s involvement in the Pacific Refinery in Ecuador and the Lower Sesan 2 dam in Cambodia. Also presented are four banks' financing of fossil fuel export projects in the Great Barrier Reef and six banks' financing the El Mirador mine in Ecuador.

The report analyzes these transactions to determine the extent to which banks have implemented Article 21 of the Green Credit Guidelines, China's innovative sustainable finance policy. Article 21 states:

  • Banking institutions shall strengthen the environmental and social risk management for overseas projects to which credit will be granted and make sure project sponsors abide by applicable laws and regulations on environmental protection, land, health, safety, etc. of the country or jurisdiction where the project is located . The banking institutions shall make promise in public that appropriate international norms will be followed as far as such overseas projects are concerned, so as to ensure alignment with good international practices.

According to the GCG, Chinese banks are expected to ensure that borrowers comply with relevant environmental and social regulations and uphold good international practices when lending overseas.

Key Points

  • Evidence suggests that widespread problems in bank compliance with Article 21 of the GCG exist. Nongovernmental organizations sought information from the banks about transactions in five of the seven cases, but there is inadequate publicly available information and transparency to determine whether the banks conditioned their loans in a way to spur better corporate environmental performance, which is the ultimate promise of the GCG as a sustainability policy. In almost all these cases, there are clear breaches of applicable environmental regulations and failures to uphold good international practice, particularly the right of indigenous communities to Free, Prior and Informed Consent.

  • The case studies indicate that Chinese banks lack transparency and sufficient methods of engaging with the public, practices which reduce their access to beneficial information and input that could improve their GCG compliance. Compared with lending within China, as was the GCG's original focus, it is relatively difficult for Chinese banks to conduct robust due diligence on borrower compliance with the range of regulations that affect overseas transactions. Similarly, it can be challenging for banks to stay abreast of ever-shifting environmental and social norms that constitute "good international practice."

  • This report concludes with several recommendations, including one that Chinese embassies abroad take a proactive role to ensure compliance with Article 21 of the GCG. A key recommendation for Chinese banks is to establish departments or units responsible for engaging with civil society on GCG implementation-particularly with respect to instances of potential noncompliance. Similarly, the Chinese Banking Regulatory Commission should establish a department or unit to monitor and oversee the implementation of the GCG, create a mechanism for engaging with civil society regarding implementation of the GCG, and lastly, establish punitive consequences for breaching Article 21 and the GCG more broadly.

Read the Full Report:

Going Out but Going Green?—Assessing the Implementation of China’s Green Credit Guidelines Overseas

Chinese Version:

Green Credit Guidelines going out: Case studies on Chinese Bank Invest in overseas Project

Observation on China's Overseas Investment wishes to present multiple views and perspectives to enhance understanding concerning China's overseas investment and global footprint, so as to promote China's "going out" in a more responsible and more sustainable way.

We welcome experts and scholars sharing related cases and views with us.

Please send us your comment to policy@ghub.org. We welcome your feedback and will share some selected insight upon permission in next issue.