As the mainland gets to grips with resolving environmental issues, private banks and their high-net-worth clients are beginning to ramp up investment in renewable and efficient energy technologies.
According to the latest quarterly index ranking compiled by accounting firm Ernst & Young, the mainland for the first time has overtaken the United States as the most attractive country for renewable energy investment.
Eckhard Plinke, executive director and head of sustainability research with Bank Sarasin & Cie, the Swiss private bank, says the mainland is among the countries that are most attractive in developing green technologies, especially in terms of the absolute market size. For example, China recently became the world's largest market for wind energy.
'We expect this dynamic development to continue, particularly in environmental technologies such as water treatment,' he says. 'From a sustainable development point of view, wind and solar are the preferred areas of green development. We are also positive about hydro as long as minimum environmental and social standards are applied in the case of large dam projects.'
Plinke is less keen on nuclear power given risks and unresolved waste disposal problems.
While private banks and their clients are taking a keen interest in the mainland's green initiatives, Plinke suggests a need for caution. He says local companies, that are either not listed or less transparent, often dominate the mainland domestic market. And, as a major part of the green sector, renewable energy is faced with large short-term uncertainties with regard to oversupply and the regulatory environment, especially amid cuts in public subsidies.
According to Dr Khoo Guan Seng, head of the innovative unit of the Singapore Stock Exchange and an Islamic finance expert, the mainland's green sector could be an ideal vehicle for wealthy investors and sovereign funds from the Middle East because they meet Islamic financial concepts known as Sharia investing.
Speaking at an 'Islamic Finance: Opportunity and Risk' seminar, jointly organised by Classified Post and Kornerstone, Khoo said investments that contributed to social benefits, such as a cleaner environment and which were not involved in the production of alcohol, tobacco and pork products, are attractive to wealthy Middle Eastern investors looking to diversify their assets.