On August 16, 2022 the Climate Investment and Finance Association (CIFA) and the Ecology and Environment Bureau of Xixian New Area hosted the Shaanxi Provincial Climate Investment and Finance Symposium. The Symposium was co-hosted and co-financed by the GIZ project Sino-German Cooperation on Climate Change – NDC Implementation and took place in Xixian New Area in Shaanxi Province. The on-site event witnessed investment and finance specialists offering suggestions to promote the work of climate investment and financing in Xixian New Area, Shaanxi Province. This area has recently been selected as one of the first national pilot areas for climate investment and financing strategies in China and its gross domestic product (GDP) was 65.278 billion RMB in 2021.
Mr. Thorsten Giehler, the GIZ Regional Director East Asia gave the opening speech, providing an insight into EU and German policies on sustainable finance; whereas Mr. Wang Chunming, Deputy Director of the Ecology and Environment Bureau of Xixian New Area, Shaanxi Province, shed light on the flagship projects being implemented in the area. Ms. Tan Xianchun, Deputy Director of the Institute of Science and Development, Chinese Academy of Sciences, indicated that the relevant financial system is constantly improving due to the dual carbon goal.
At present, the framework of green finance has been preliminarily formed, which includes basic institutions, incentive, and a constraint mechanism. Many kinds of workstreams in climate finance are mainly embedded into this framework of green finance in China, for instance climate finance policy system, guidelines, standards, tools and products. Therefore, in the subsequent development of institutional mechanism in green finance, the climate investment and financing should be better integrated with green finance with both climate mitigation and adaptation being put in a more prominent position.
Mr. Sun Yiting, Director of the Chinese Society for Environmental Sciences and standing member of CIFA, proposed three models to address new challenges: the first model envisions the transformation of management and operation methods such as the establishment of a low-carbon industry guidance fund by local governments, transforming the previous governmental financial allocation into a fund for market-oriented approach, improving the efficiency of the use of public funds, and effectively leveraging capital to tackle climate change. The second model is the innovative combination of financial instruments. For example, the Asian Development Bank (ADB), amongst others, has incorporated technical assistance, risk sharing, investment funds and other models and mechanisms into traditional loans or sub-loans. Through such a combination, multiple issues such as capital, technology and risk are resolved. Finally, the third model expounds on how the community of climate investment and financing can be expanded through multipartite cooperation and vertical expansion.
Mr. Zhang Jiutian, Executive Director of the Green Development Institute at Beijing Normal University, highlighted two problems of climate finance. First is a question of where funds come from and the second being failure to take relevant technologies and industries into consideration. Some local financial institutions may not understand low-carbon technologies and industries, leading to information asymmetry between industry and finance. It is critical and realistic to build a project database for climate investment and financing which is not a simple list of projects but an effective tool towards advancing climate finances and addressing climate change.
Mr. Bai Hongchun, Director of the Green Finance Department, CECEP Consulting Co. Ltd. emphasized that “carbon emission reduction support tools” which aim to assist the development in clean energy, energy conservation and environmental protection, carbon emission reduction technologies among other key areas, can be well applied to projects for significant climate benefits. Indeed, the launch of the carbon emission reduction support tool has encouraged banks to roll out green finance. The same goes for the use of the 300 billion RMB of infrastructure fund recently established by China Development Bank and Agricultural Bank of China to promote the construction of climate investment and financing projects.
Ms. Huang Dafei, Executive General Manager of the Fixed Income Department of China International Capital Corporation Limited, pointed out that the volume of demand for climate finance is rather huge. He pointed out that carbon trading continues to play a critical role in markets and should guide the discovery of carbon prices, which is an essential tool for economic transformation nationwide. Emphasizing on the future scenario, financial instruments based on carbon assets were said to strongly support the realization of nationally determined emission reduction targets.
Mr. Li Sheng, Project Leader of REITs (Real estate Investment Trusts) at Fullgoal Fund Management Company Limited, elaborated on the role of REITs in climate finance. The so-called REITs refers to the future cash flow provided by a specific project or a specific real estate asset as the underlying asset, which is an equity instrument. In June 2021, China’s first batch of publicly offered infrastructure REITs, numbering nine in total went public. Fullgoal as one of the green REITs has 14 products listed so far, with a market value of about 60 billion RMB.
Mr. Liu Daizong, Director of Sustainable Cities in China, World Resources Institute (WRI), reported and introduced the “Near Zero Emission City Accelerator” project, which was initiated by CIFA and WRI under the guidance of the Department of Climate Change of the Ministry of Ecology and Environment.
Building upon their role of providing CIFA with policy suggestions on climate finance pilot work for the Xixian New Area, GIZ together with a German think tank- NewClimate Institute will continue playing a critical role in providing support, to further develop the pilot construction of climate investment and financing in Xixian New Area in Shaanxi Province for the upcoming future.
