Reflections on the Progress and Future of Green Finance

It is the second anniversary of the <a href="https://www.paulsoninstitute.org/green-finance/" rel="noopener noreferrer" target="_blank" class="sm-text-color-themeColor1">Paulson Institute’s Green Finance Center</a>. Over the past year, the GFC has been fully engaged in advancing green finance on many fronts via our convening power and thought leadership. What were the significant accomplishments in 2019-2020 that helped to drive forward green finance?

The role fintech can have in greening the financial system is full of potential and looks to play a more substantial role as the technology gets better with time.

In terms of US-China relations, COVID-19 has undoubtedly created challenges in the relationship, but more broadly the virus has induced global conversations on a variety of topics like the frailty of health care systems, the interconnectedness of supply chains, and the income disparities within countries and amongst countries that encompass more than the bilateral relationship. The one that is generating much thought is the global economic recovery. It will be interesting to see how “green” the recovery packages will look, particularly in the US and China, as the largest economies and the largest carbon emitters in the world.&nbsp;&nbsp;&nbsp;

The Paulson Institute began to lead on green finance initiatives by serving as an advisor to the G20 Green Finance Study Group that was established in 2016 and as a leader in initiating the US-China Green Fund. In 2018, our Green Finance Center (GFC) was officially established to continue the dialogue and actions needed to develop green finance as a key mechanism for responding to the growing environmental concerns of the world because while we have seen good progress since 2016, there still remains a vast amount of work ahead of us.

Green Finance Center's study on the far-reaching impacts of fintech on sustainable development.

Fintech Drives Sustainable Development in China: Executive Summary:

The question of how to fund the world’s low carbon transition and shift to more sustainable development in direct response to the perils of climate change is a significant one.

DEBORAH: Systemic change is not an overnight sensation, but a long series of small wins and gradual progress. The green transformation of the global financial system is no different. And in its second official year of work, the GFC did accomplish a great deal toward this transformation including helping to develop working mechanisms for the Green Investment Principles for the Belt and Road as part of the <a href="https://www.paulsoninstitute.org/green-finance/green-scene/gip-steering-committee-meets-to-push-forward-greening-the-belt-and-road/" rel="noopener noreferrer" target="_blank">steering committee</a>, a <a href="https://www.paulsoninstitute.org/green-finance/green-scene/paulson-institute-convenes-media-event-to-jointly-release-report-on-how-fintech-facilitates-green-finance-development/" rel="noopener noreferrer" target="_blank">well-received report</a> on green fintech applications that are driving sustainable development in China, and our content-rich advocacy efforts through convening and thought leadership pieces.

Gillian Tett is editor-at-large, US and chair of the editorial board at the Financial Times. The veteran financial journalist turned ESG evangelist brings green finance to the mainstream.

The Green Team Speaks to...Gillian Tett

The role fintech can have in greening the financial system is full of potential and looks to play a more substantial role as the technology gets better with time. This idea is a significant focus for the GFC, and its impact is clear from our 2019 report <a href="https://www.paulsoninstitute.org/press_release/paulson-institute-releases-study-on-how-fintech-enables-green-finance-development/" rel="noopener noreferrer" target="_blank">Fintech Facilitates Green Finance Development in China: Cases and Outlook</a>. It featured four substantive case studies that highlighted fintech-enabled projects that support green finance development in China. The projects included were the Green Finance Information Management System of the Huzhou branch of the People’s Bank of China, Green Finance One-Stop Service Platform of the Huzhou Municipal Government, Green Credit Management System of Huzhou Bank, and the Remote Damage Assessment and Claim Settlement System for Catastrophe Insurance of the People’s Insurance Company of China Property and Casualty. In light of the innovative fintech developments in China, we will likely have a follow-up report this year.&nbsp;

DEBORAH: The question of how to fund the world’s low carbon transition and shift to more sustainable development in direct response to the perils of climate change is a significant one. Global governments can only foot a small percentage of that bill. Private capital has a critical role in making up this difference, and in driving the green finance movement for the global financial system. China’s inclusion of green finance on the 2016 G20 agenda brought the niche topic from the corners of the finance community to a global audience.

The Green Investment Principles (GIP) for the Belt and Road held its first steering committee meeting via video conference in early April this year. Co-chaired by Dr. Ma Jun, Chairman of the China Green Finance Committee, and Sir Roger Gifford, Chairman of the Green Finance Institute at the City of London, this meeting convened senior [...]

GIP Steering Committee Meets to Push Forward Greening the Belt and Road

As PI's Green Finance Center turns two, Deborah Lehr, Vice Chairman & Executive Director, looks back on the Center's work thus far.

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DEBORAH: Certainly, the lingering impact of the pandemic will be prevalent in the outlook for the rest of the year that had very high expectations for it. This year began with global leaders looking at the green agenda at Davos and was supposed to be another record year for green bond issuances following a strong 2019. But while expectations may need to be tempered, we are still looking forward to a full year ahead for the GFC. We aim to make progress on some of the GFC projects we have in the pipeline, including another fintech report and continuing our work on the GIP. We also look forward to trading on China’s national carbon market and the prospect that green finance remains a priority for China, even as its economy suffered in the first quarter.&nbsp;

Learn more about the work of the Paulson Institute's <a href="https://www.paulsoninstitute.org/green-finance/" rel="noopener noreferrer" target="_blank">Green Finance Center</a>.&nbsp;

The intersection of US-China relations and green finance does not stray far from the Belt and Road Initiative (BRI), China’s major infrastructure development strategy. It currently involves 126 countries that account for about 23% of the world’s GDP and about 28% of global carbon emissions. How important will a green BRI be for the future, and how will the GFC tackle this in their work?

The latest Tweets from PI Green Finance Center (@pi_greenfinance).

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What are the expectations for the upcoming year for the GFC? Will the COVID-19 outbreak or the challenges in the US-China relationship have an impact? If so, what kind of impact?

DEBORAH: Indeed, the emerging technologies today that dominate the media’s attention, like big data that drives artificial intelligence and machine learning, are seeing applications across the board, and especially in finance. After all, it has given rise to the portmanteau, fintech. The ability of fintech to bring in the unbanked population, provide credit approval in seconds, and automate traditionally tedious transactions are some of the often-cited successes of fintech thus far.

DEBORAH: Many of the BRI projects are infrastructure-based, and the fact that these new builds will be around for the next few decades—the same decades that are critical for responding to our climate challenges—is harrowing. Let that sink in with the estimates above that the BRI participating countries account for 23% of the world’s GDP and about 28% of the world’s global carbon emissions now. A green BRI is an imperative and a priority.

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FINAL GFC Anniversary Video FINAL 5.10.20

Across many sectors of business and aspects of daily life, technology is bringing a profound change to everyday norms. This is especially true in the financial industry with the growing weight of financial technologies (fintech) that is causing disruption and spurring innovation. Do you agree, and to what degree will this driver of transformation be a part of the GFC’s work?

Green finance is becoming an increasingly important global development beginning when China officially included it in the G20 agenda in 2016. What is the genesis of the Paulson Institute’s work in this area? How has it paralleled the growing awareness of green finance globally?

China has publicly announced the intention for green infrastructure development on the BRI and most vocally at the Belt and Road Forum in 2019. The GFC and partners like the Green Finance Committee of China Society for Finance and Banking and the City of London Green Finance Initiative have begun to address this question by establishing the Green Investment Principles for the Belt and Road (GIP). The GIP is a set of voluntary principles that incorporate sustainable development criteria to BRI investments to ensure environmental friendliness, climate resilience, and social inclusiveness by signatories. The principles are only a first step, and the GFC will continue to work on ways to add implementing and enforcing elements to add more teeth with the aim for more substantive outcomes.&nbsp;