Belt and Road green investment that delivers on climate action

Infrastructure developments play a key role as part of the global “build back better” narrative as well as contribute to the Paris Agreement on climate change. In order to maintain global economic growth at a level that meets the needs of a rapidly growing population, a massive global infrastructure investment of $66 trillion is needed in emerging economies before 2030.

However, COVID-19 has caused a collapse in investment flows to sectors relevant for the SDGs in developing countries, where the decline is much larger than in developed countries.

Meanwhile, according to the United Nations Department of Economic and Social Affairs, in 2015, with a total population of 4.6 billion inhabitants, countries within the Belt Road Initiative (BRI) accounted for 62.3% of the world population. In a zero migration scenario, its population is projected to increase to almost 5.2 billion in 2030. The urbanization process is expected to continue for decades and the ever-increasing majority of humankind will likely be living in urban areas in the BRI.

According to the World Economic Forum’s Global Risks Report 2021, climate change, biodiversity loss and ecosystem collapse continue to be catastrophic risks. Indonesia, Malaysia, the Philippines, India, and Thailand are estimated to be the five countries most vulnerable to climate change out of the 48 countries covered by Swiss Re’s Climate Economics Index.

China, as the world’s most populous country and the second largest economy, will be a key partner in mitigating these risks and achieving the SDGs. China is increasingly showing environmental leadership on the global stage, supporting the Paris Agreement on climate change, promoting a philosophy of reviving an ecological civilization, hosting the start of the COP15 biodiversity summit in Kunming last month (concluding next year), and increasing commitment to a green BRI.

The Belt Road Initiative offers a new development paradigm that connects countries together through infrastructure, trade and interconnectivity. Crucially, BRI infrastructure will need to be in line with sustainable development targets to ensure efficient resource use and avoid deteriorating the environment. Consequently, BRI can offer a significant contribution toward meeting the 2030 SDG agenda and Paris agreement, as China did with MDGs by lifting people out of poverty.

Multi-stakeholders can build an effective ecosystem for green investment. International influencers and standards play a key role, such as Green Investment Principles (GIP). Key influencers in the green investment ecosystem are government, financial regulators, financial institutions, and official research institutes.

In China, the state council has final decision-making authority for the structural organization of the research system and guidelines for research policy. Commercial banks, national development banks and other policy banks, multinational development banks, sovereign wealth funds in collaboration with SOEs, private firms, create and deploy the financial instruments such as green credit, green bonds, green insurance to scale up the green technologies in energy, water building, industry, mobility, ICT.

In China, the Forum jointly initiated and implemented the GIP for the BRI. It requires members to set ambitious green investment targets, and to invest in the growing pipeline of BRI green projects. By June 2021, the GIP expanded its membership to 39 signatories and 11 supporters from 14 countries and regions around the world. The majority of signatories who reported are actively engaging in developing or expanding their green financing activities and capabilities, and encouragingly close to 90% – refers to national and/or international reference standards and taxonomies for defining what constitutes “green” investing.

At the core of the GIP next phase through 2023 will be a series of regional chapters. This regional focus will zero in on structural barriers to green investment and work for the benefit of all major stakeholder groups: investors seeking to grow green investments, project developers seeking capital, and local communities seeking a better living environment.

Building on the publication of our white paper A Leapfrog Moment for China in ESG Reporting, the Forum undertook research, and received insights and commitments from the private sector on ESG investment. Chinese corporates are building capacity rapidly – partly in response to pressure from investors and capital providers to communicate and report on their ESG approach – but also because strong ESG practices can pave the way to more resilient businesses and even open up entirely new markets for sustainable products and services.

Nature-based solutions are also important, like One Trillion Trees initiative. With this initiative, we are working together with governments and businesses around the world to conserve, restore and plant one trillion trees.

There is a tremendous opportunity to make an impact on green infrastructures which will serve the local community for decades.