In response to the growing trend of climate change, energy transformation and low-carbon development, more and more government policy-makers and investors are realizing that coal investment activities greatly harm public health and exert much negative impact on the environment and society. As a result, governments and enterprises will face risks related to finance, reputation and stranded asset. Therefore, they are gradually strengthening and promoting the policies and actions regarding public and social capital to withdraw from the coal industry and migrate to green industries.
Based on this, Greenovation Hub (GHub), with the support of the Global Environmental Institute (GEI), the investment and financing policies in coal-related industries of international multilateral financial institutions, multilateral initiatives, financial institutions from G20 countries, large commercial banks, as well as Chinese financial regulators and major banks. According to the comparative analysis, this report provides actionable recommendations with China’s financial institutions to specify low-carbon transformation policies and standards, to formulate systematic environmental and social safeguards and sectoral investment strategies, as well as integrate global and national climate goals into institutional operations and related businesses for the assistance in the global actions on climate change and the achievement of the SDGs.
In order to realize the transformation of investment structure in the energy and power industry, international financial institutions generally are restricting coal investment by signing international agreements, making specific policies and assessment requirements; setting higher thresholds ,specific technical requirements and capacity standards; as well as affirming the disinvestment policies and withdrawing map of in the coal-fired power industry. To restrict capital investment in the coal-fired power industry, international commercial banks tend to strictly screen the enterprises or projects applying for their financing and investment in line with their specific sectoral criteria .
China's policy on coal investment and the information disclosed by Chinese financial institutions show that: guiding financial institutions to gradually limit investment in the areas of low energy efficiency, high pollution, high emissions and high energy consumption is mainly accomplished through relevant policies, industry guidelines and standards formulated by the regulators; pushing the construction and development of a green financial system shall achieve industrial transformation;actively developing green financial products would spur capital to more eco-friendly projects and enterprises.
However, most Chinese financial institutions, including policy banks, development banks and commercial banks, have not made clear and specific requirements or statements on investment in the coal-fired power industry.
Facing the increasingly severe international investment environment, as well as the need to meet the domestic and host countries’ policies and requirements regarding the environment, energy and climate, as well as avoiding the various risks inherent in the investment and financing process. It is recommended that Chinese financial institutions formulate and improve their own sustainable investment strategy, and gradually make more specific and clear implementation measures:
- Implement the existing national strategies and the policies, systems, guidelines and standards promulgated by governmental authorities, as well as specify and improve the implementation of customer supervision rules in light of their own circumstances;
- Formulate and improve the environmental and social safeguards , and improve the information disclosure and transparency;
- Establish a systematic, comprehensive, independent and clear investment and financing policy, such as mapping out sectoral investment criteria and standards, formulating exclusion lists as well as making industry-specific ESG measures;
- Incorporate the Nationally Determined Contributions (NDCs) and Sustainable Development Goals (SDGs) of the host countries into the China’s overseas investment strategy. In order to help the host country's green and low-carbon transformation and address climate change, risk assessments based on actual conditions should be conducted, as well as promoting more climate resilient investment and financing services considering the local social and economic development.