OCOI 7 | China-led Development Banks Draw Global Attention

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The China-led development banks are developing quickly, and will soon create additional financial flows to regional and global projects. These new platforms are likely to have a significant global impact, and therefore there is pressure on them to adopt high standards and appropriate safeguards. Earlier this year, the environmental ministers from the BRICS countries met and discussed the green economy and the prospect of creating a green fund within the BRICS New Development Bank. Last week, Britain applied to join the Asian Infrastructure Investment Bank (AIIB), and is likely to be followed by more EU countries like Germany, France and Italy.The pressure is now building on the AIIB to develop strong policies to govern its future operations.

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Financial institutions provide essential support for global investment projects, especially in developing regions where development banks play vital roles in initiating new projects. Therefore, financial institutions, especially development banks, have the responsibility in ensure that the projects they finance adopt high standards and strong measures for mitigation of environmental and social impacts. This can be ensured by implementing strong project appraisals into the loan approval process and implementing appropriate safeguard policies. Multilateral institutions like the World Bank and Asia Development Bank have systematic environmental and social safeguard, which are often referred to as being among the best standards for development finance. At present the World Bank is reviewing its safeguard policies and has held multi-stakeholder consultations to discuss the proposed reforms.

 

The China-led development banks are developing quickly, and will soon create additional financial flows to regional and global projects. These new platforms are likely to have a significant global impact, and therefore there is pressure on them to adopt high standards and appropriate safeguards. Earlier this year, the environmental ministers from the BRICS countries met and discussed the green economy and the prospect of creating a green fund within the BRICS New Development Bank. Last week, Britain applied to join the Asian Infrastructure Investment Bank (AIIB), and is likely to be followed by more EU countries like Germany, France and Italy. The AIIB has not officially responded to concerns regarding its governance and safeguards, but in comments to the media, Chinese officials have said that the bank will adopt “appropriate” standards. The BRICS New Development Bank and AIIB will both be formally established in 2015 and begin operation by 2016, and it is therefore important to pay attention to how the governance and safeguards standards of the two banks will be formed and articulated. In this issue we present relevant information on the new development banks and we also invite you to join the discussion on the environmental and social responsibility of global financial institutions.  

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  • Do you think that the finance sector can help to protect the environment and decrease environmental impact of projects that they finance through environmental and social safeguards? In what ways do you think it can improve?
  • Do you think the way "green" is defined by finance sector is the same as "green" as you would define it? In what way do your interpretations differ and how are they similar ?
  • As China becomes increasingly influential in global development finance, what role do you think it can play in both meeting global needs for project financing and ensuring responsible investment ?

 

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