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New pilots show green future for China’s financial system

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Editor’s Note: Matteo Giovannini is a finance professional at the Industrial and Commercial Bank of China in Beijing and a member of the China Task Force at the Italian Ministry of Economic Development. The article reflects the views of the author, and not necessarily those of CGTN.

The growing importance of terms such as “sustainability” and “circular economy” in today’s global financial landscape is illustrated by the frequent discussions of these major issues at government level and their extensive media coverage.

In addition to profit margins and risk management, institutional investors have also integrated aspects such as energy consumption and environmental protection into their financial models and portfolios, and the coronavirus pandemic has heightened this attention as this are elements which, if not properly taken into account and addressed, could have long term destructive effects on our planet in addition to monetary losses.

A clear new global trend seems to have emerged, shifting the long-standing paradigm of the investment world. Essentially, this is a radical shift in focus – from creating value for shareholders, which only includes economic characteristics, to creating value for stakeholders.

In this regard, China is ahead of other countries, demonstrating a high level of responsiveness and ability to follow the rhetoric. The recent announcement that two of China’s urban centers, Beijing and Chongqing, have been approved to launch pilot green finance zones is in the right direction, as this new sector plays a key role in mobilizing and channeling investments in China’s low-carbon economic transition.

Green finance reform test zones represent further confirmation of China’s comprehensive strategy to reduce greenhouse gas emissions over the next four decades to meet the carbon neutrality pledge made by President Xi Jinping at the 75th session of the United Nations General Assembly.

The launch of the two new pilots offers the opportunity not only to test the degree of integration in small geographic areas between local authorities and financial institutions, but also to validate the level of openness of the territories to the implementation of a major national goal.

Beijing’s pilot green financial reform zone is thus well placed to make the city an international center for green finance and an example of cross-border cooperation with countries that attach great importance to the principles of respect for the environment and sustainability. in their infrastructure projects. / Getty

Beijing’s pilot green financial reform zone is thus well placed to make the city an international center for green finance and an example of cross-border cooperation with countries that attach great importance to the principles of respect for the environment and sustainability. in their infrastructure projects. / Getty

This decision can also be interpreted as part of the government’s efforts to create a stronger green financial system whose experience, gained through targeted policies and innovations at the local level, can then be extended to the national level. Beijing and Chongqing will pioneer green finance principles and their best practices would be adopted elsewhere in China.

This kind of lawsuit is going to be extremely successful in Beijing given that this is where the central bank, state banks and financial authorities have their headquarters. This allows for a higher level of coordination among participants in the green finance ecosystem.

Beijing’s pilot green financial reform zone is thus well placed to make the city an international center for green finance and an example of cross-border cooperation with countries that attach great importance to the principles of respect for the environment and sustainability. in their infrastructure projects.

The decision to choose Chongqing as the country’s first carbon-neutral provincial economy can be seen as recognition of recent efforts by the municipality, China’s most densely populated, to explore reforms and innovations through deep integration of green finance. and the surrounding industries. Chongqing’s announced plan to build a green finance avenue in its downtown area shows how it is embracing the green transition.

A study published by Tsinghua University last year estimated that China would need to invest more than $ 20 trillion by 2050 in the energy system alone to become carbon-free by 2060. To achieve a As an ambitious objective, coordinated and targeted development policies are necessary; above all, it requires the undisputed support of each stakeholder.

While the recent announcement to improve the performance of green finance is concrete evidence of strong alignment with a common goal, and while public sector contribution is a necessary starting point, the role of the private sector will continue. being essential in redefining the nature of doing business, and also, in helping to make this tectonic transition from a business environment that exploited nature to a completely different environment that preserves it.

Ultimately, the future outcome of China’s attempt to raise the bar on green finance and become a global leader in green finance will depend on its ability to create a well-thought-out incentive system for financial institutions. to invest in green finance.

(If you would like to contribute and have specific expertise, please contact us at opinions@cgtn.com.)


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