The G20 summit, held in Hangzhou from 4 to 5 September 2016, has put the focus on the institutional and market challenges to green finance with the launch of a report by the G20 Green Finance Study Group (GFSG).
The GFSG, which was formed under China’s presidency of the G20, and is co-chaired by the People’s Bank of China (PBOC) and the Bank of England (BOE), said in its report that bank lending to green projects remains under-represented. Less than 1 percent of global bonds are currently labelled green, it stated, while less than 1 percent of the holdings by global institutional investors are registered as green infrastructure assets.
The report went on to cite voluntary commitment and principle options as financial tools that build upon long-existing fiscal measures, such as tax subsidies, in order to drive capital towards green projects, including those in developing countries.
The summit was the first to address green finance in its official statement, a shift that follows on from the milestone COP21 agreement which drew support from 195 countries in Paris in December 2015.
Sean Kidney, CEO and co-founder of Climate Bonds Initiative, told Development Finance that the meeting of G20 leaders in Hangzhou was “a significant step forward” towards the greening of financial markets.
“I think we’ll see a big movement over the coming 12 months. We already see important projects underway in India, Mexico, Brazil and Morocco, and strong appetite for green finance projects in countries such as Indonesia, Kenya, Senegal and Colombia. China is of course where by far the biggest steps have already been taken,” he said.
Kidney however added that the PBOC has yet to provide financing for green infrastructure, despite holding a prominent role in talks on the subject throughout the summit.
On the eve of the G20, the PBOC, together with six other Chinese central agencies, released a strategic paper promoting what it called “ecological civilisation”, entitled Guidelines for Establishing the Green Financial System.
In it, the authors said that in order to reflect the guidelines, China’s outward investment would need “an enhancement of the level of ‘greenness’”, along with a “global consensus on green finance under the G20 framework” and “a progressive opening of the green securities market”.
The guidelines also reference China’s intention to establish a national-level green development fund.