Friends of the Earth US is pleased to publish a new report assessing the environmental and social performance of Chinese banks’ investments in Belt and Road countries. The report, “Investing in a Green Belt and Road? Assessing the Implementation of China’s Green Credit Guidelines Abroad,” examines Chinese overseas investments through the lens of the Green Credit Guidelines, a 2012 Chinese bank policy which obligates banks to comply with host country law and international norms and standards in overseas investments.
Our metrics of analysis are based upon Chinese bank regulator’s official key performance indicators (KPI) for the Green Credit Guidelines, which were published in 2014. It also provides recommendations for how the Chinese banking sector can further develop and refine the KPIs in order to better monitor and measure green credit implementation. Containing seven case studies from Belt and Road countries, the report also offers analysis regarding how Chinese banks can ensure the development of a green, and not brown, Belt and Road.
Key Findings of the report include:
- Similar to the findings of a 2014 study published by Friends of the Earth US, Chinese banks still struggle to comply with host country laws and regulations, let alone international norms and standards. Of particular concern are international norms related to banks requiring high quality environmental and social impact assessments from their clients, in addition to ensuring that public consultations are conducted based on Free, Prior and Informed Consent.
- Chinese banks continue to have weak channels of communication and engagement with the public and local stakeholders, which significantly undermines the implementation of the Green Credit Guidelines.
- The China Banking Regulatory Commission’s publication of the Key Performance Indicators (KPIs) is a positive first step in promoting better implementation of the GCGs; however, some KPIs ) remain under-developed in regards to advancing the spirit and objectives of the GCG, particularly those relating to international practices and norms, and resolving local conflicts.
- As currently written, the KPIs miss an opportunity to serve as a valuable tool in the global fight against climate change. They should promote one of the international banking sector’s leading climate-related financing norms: curbing coal sector financing.
- Better bank-level and project-level disclosure, including requiring that banks publicly disclose their KPI self-assessments, would promote stronger implementation of the GCGs and thus better environmental and social risk management.
- Chinese banks should better use the GCG as a means to screen and assess how environmental and social risks may in fact undermine the financial viability and feasibility of projects, especially in the infrastructure sector.
