The View | China’s green finance model shows how saving the planet can also be a savvy investment

With the world’s largest carbon trading exchange, huge green bond market and plethora of green private equity funds, China has shown that well-crafted regulatory, policy and financial frameworks can spur private interest in green finance

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A photovoltaic power plant in Turpan, in northwest China’s Xinjiang Uygur autonomous region, is part of the country’s push towards green energy. Photo: Xinhua

Published: 2:03pm, 20 Feb 2019Updated: 2:25pm, 19 May 2021

Green investing has turned out to be both a good deed and good deal. China, which is now one of the world’s largest markets for green finance, is showing how investing in sustainability is not only important for saving the Earth but can bring about excellent returns for the investor. Other countries should take note.

Chinese President Xi Jinping has made environmental protection one of the top three priorities of his second term and launched an extensive green finance initiative. The intention is to use market mechanisms combined with government policy – and some government financing – to promote green growth and better environmental protection.

Without private sector financing, China will be unable to muster the estimated US$1 trillion needed to meet its ambitious environmental goals. Government financing will only cover about 15 per cent of the total price tag.

As China has discovered, stimulus spending does not always ensure that government money is used effectively. Governments cannot command that private money be used to promote green development. Instead, they must create vehicles to attract these funds through a combination of good policy, incentives and disincentives, and a regulatory structure that promotes investment and green development.

Only through creating the right regulatory, policy and financial frameworks can China attract the needed private-sector financing to meet its goals.

Chinese migrant workers walk near a power plant during a polluted day in Beijing in December 2018. Chinese President Xi Jinping has made environmental protection one of his top three priorities. Photo: EPA-EFE

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.css-1m2rp1p{color:#34b8b5;}The View | China’s green finance model shows how saving the planet can also be a savvy investment

The View | China’s green finance model shows how saving the planet can also be a savvy investment