China has the opportunity to play a critical and fundamental role in tackling climate change, through its influence and approach domestically, regionally and globally
China’s leaders recognise that green finance is essential to meet China’s climate ambitions. Through its International Climate Finance portfolio, the UK government is committed to working with China to cut emissions and achieve a more sustainable future. Benefitting from an increasingly receptive environmental political economy, UK PACT therefore looks for opportunities to align green finance and Environmental, Social and Governance (ESG) standards with international standards.
China-UK PACT is aligned with government demand and seeks to mature China’s green financial markets by focusing on five areas:
Harmonisation: aligning Chinese and international green finance taxonomies; Transparency through disclosure of climate-related financial risks and ESG uptake; Innovation - developing innovative green financial products and services; and Capacity Building – domestically - accelerating implementation of national green finance policies at local levels and internationally for Chinese financial institutions using green investment tools and approaches internationally. In the first round of funding, China-UK PACT funded 8 projects and one skill-share (see success stories below).
Project lead - City of London Corporation
“The ESG Leaders Forum (ELF) will allow investors in the UK and China to demonstrate that they are putting ESG principles into practice. Unpacking the barriers to scaling ESG will be the key “value add” of ELF.” - Sir Roger Gifford, Chair of UK Green Finance Institute
Through this project, the Chinese investment community will explore ways to further embed ESG considerations into financial decision-making through exchanges with UK counterparts via the ESG Leaders Forum (ELF). This practitioner-led forum will equip institutional investors with the knowledge, tools and motivation to increase their uptake of ESG practices and to understand their role in working towards China’s transition goals.
Project lead - Climate Disclosure Project (CDP)
“As a not-for-profit charity that runs the global disclosure system for investors, companies, cities, states and regions to manage their environment impacts, CDP is pleased to help to build the capacity of those key stakeholders to take action to mitigate climate change.” - Sue Howells, Chief Operating Officer, CDP
This project will incorporate and adapt international best practice on climate-related financial disclosure to the Chinese context. It will facilitate and subsequently institutionalise procedures that encourage the flow of more detailed climate-related information between seekers and sources of capital to promote data-driven decision-making. Building on current regulations around mandatory reporting requirements, it will help mainstream the consideration of climate impacts by the financial sector.
Project lead - ClientEarth
"China’s financial institutions play a leading role in the greening of the Belt and Road Initiative. This project will help guide ambitious, coherent and actionable policies coupled with capacity-building for implementation.” - Dimitri de Boer, ClientEarth Chief representative for China
Across China, two complementary methods of considering green finance have emerged: the market-driven Green Investment Principles (GIP) and the public sector’s Green Development Guidance (GDG). This project aims to bring together GIP and GDG to ensure closer alignment and harmonisation both between the programmes and with international best practices, leading to the funding of fewer high-emission projects both domestically and across the entirety of the Belt and Road Initiative.
Project lead - Climate Bonds Initiative
“Through this project, CBI and partners will recommend standards and measures that to further incentivise the growth and international alignment of China’s green bond market, and thus strengthening prospects for increased investment in climate solutions.” - Sean Kidney, CBI CEO
The frequency and volume of China’s green bond issuances continue to increase on an annual basis, and international investors are keen to participate more significantly. This project will both support the continued scaling of the Chinese green bond market as well as to recommend rules, standards, measures, and expectations to ensure alignment with international best practices on monitoring, transparency and disclosure.
Project lead - Beijing Institute of Finance and Sustainability (BIFS)
“BIFS is pleased to have the opportunity to assist in the acceleration of green investments and low-carbon development efforts across Asia through a two-pronged approach that both builds the capacity of domestic Chinese stakeholders and encourages offshore green investments.” - Hu Min, BIFS, Executive President, BIFS
This project scales early successes in the introduction of the Green Investment Principles (GIP) across the Chinese financial ecosystem; during 2021, it will focus on an expanded set of financiers both in China and in neighbouring countries as well as a broader range of issues, including harmonised standards for green investments and more wide-spread support for innovations in green financial products.
The second China-UK PACT funding round closed in August 2020.
Projects were assessed as part of an open call to prospective applicants following two stages: 1) Expression of Interest (EOI) to outline how a proposed project responds to the call; and 2) a request for detailed proposals for those shortlisted at the EOI stage.