WASHINGTON - China's efforts to green its financial sector have earned a
thumbs-up from US environmentalists, who say regulators in the US could learn
from Beijing's recent success in stimulating investments that don't despoil the
planet.
Friends of the Earth-US, highlighted in a recent report Chinese financial
sector policies designed to limit pollution and climate change and to encourage
lenders and investors to take a longer-term and broader view of risk, one that
factors in the risk of losses stemming from potential environmental problems.
Michelle Chan, an author of the report, urged regulators in
Washington to draw on the Chinese experience as they craft new rules for the
troubled US banking sector.
"Because of the financial crisis and bailout, we in the US have a historic
opportunity to update regulations in ways that enable Wall Street to finance a
sustainable future," said Michelle Chan, an author of the report. "China offers
some interesting examples of how sustainability can be incorporated into
financial regulation."
The study, "The Green Evolution: Environmental Policies and Practice in China's
Banking Sector", hailed regulations that it says are working to prohibit
Chinese banks from lending to companies not in compliance with environmental
laws.
"There has been significant progress in the development of sustainable finance
in China, including the creation of influential regulations, internal bank
compliance mechanisms, and some public reporting," said the 59-page report.
Chinese banks - particularly those that have received government bailouts,
Friends of the Earth noted with an eye to the massive taxpayer-financed rescues
now being doled out to US banks - have slashed lending to polluting and
energy-intensive industries.
The report highlighted the example of the Bank of Communications, which in 2007
reported that it had cut lending to the iron and steel industries by US$1.14
billion. Also cited is the Industrial and Commercial Bank of China, which the
report said reduced its loans to polluting industries by 24%.
Thanks to a raft of policies and rules introduced over the past two years, the
report said, green concerns have been given higher priority. The Ministry of
Environmental Protection was created and has so far consigned 38 firms to a
"credit blacklist" because of environmental violations. In consequence, at
least $293 million in loans have been denied or recalled.
One recent measure, the "Green IPO" (initial public offering) policy requires
companies in polluting or energy-intensive industries to disclose environmental
information and face a public comment period before they can sell stock to the
public. Twenty out of 38 companies reviewed since the policy took effect in
February have had their IPOs rejected or subjected to further assessment.
The report did however express some concern. China embraced green finance
policies relatively recently, it said, so for now the country's banks continue
to fall short of best international practice when it comes to managing
environmental credit risk, reporting to the public, and engaging advocacy
groups and other stakeholders.
The pro-environment policies do not apply to Chinese banks' growing portfolios
of loans to projects and clients overseas, the report said. It nevertheless
acknowledged ongoing efforts to adopt the Equator Principles, a set of
environmental standards for international banks.
At home, it added, the environmental impulse is constrained by China's
overwhelming dependence on readily available but problematic sources of energy,
including coal, large dams and nuclear power.
Even so, Chan said, Chinese banks have had to make drastic changes and "policy
makers in the United States should demonstrate the same kind of vision".
Chan has long worked with financial firms and advocacy groups to highlight
worrying Chinese ventures. Her endorsement of the green finance initiatives
likely will draw attention because of this background, and because even Wall
Street executives regard her as one of a small number of advocates with a
credible grounding in finance.
Earlier this year, the World Bank issued a separate study detailing China's
growing role in financing desperately needed transportation, communications,
and other infrastructure in Africa south of the Sahara desert. Calling this "a
hopeful trend for Africa", it described Chinese firms as dealing with social
and environmental issues - the resettlement of populations displaced by large
dams, for example - much as have their Western predecessors and competitors.
Noting that Chinese investors complied with local environmental laws, the
bank's July report suggested that if Africans want Chinese firms to improve
their environmental performance, then African governments must upgrade their
national regulations.
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