Financing the Future

Two major finance forums in Beijing provide directions for developing sustainable climate funding.

WHEN Mark Carney was the governorof the Bank of England， he foundthat the number of extreme weatherevents had tripled and the cost ofthese disasters increased fivefold in the past 25years. The financial sector must do something tomake a change， he thought.

Since then， with climate change today threateninghuman survival， both governments around the world and the financial sector are promotingclimate finance， which is local， national or transnationalfinancing from public， private and alternativesources to support mitigation and adaptationactions for addressing climate change. Theultimate objective of climate finance is to promotelow-carbon development and achieve thegoals set for nationally determined contributions– efforts by countries to reduce national emissionsand adapt to the impacts of climate change.

Carney， now special envoy of the UnitedNations for climate action and finance， andchair of Brookfield Asset Management， calls the“net zero” goal set by governments the biggestbusiness opportunity of this era. People are usingclimate finance to develop green technologies， innovatenew business models and create new values.“The whole society has gradually recognizedthe great value of reaching net zero emissions.Investors and loan providers， as well as high-tech firms will gain long-term returns，” Carney toldthe Financial Street Forum 2024 held in Beijing inOctober.

Climate finance was a hot topic at the forum，which also gave perspectives on China’s ongoingfinancial reforms and its commitment to openingup. To achieve net zero goals， Carney suggestedincluding finance into climate solutions. Banks，funds and asset management companies shouldall do that. Also， firms should disclose their carbonemissions in production， and restrain carbonemissions in energy use， and other emissions inthe whole value chain.

Multinationals have an additional task. Theyshould invest in developing countries and helpthem to reduce carbon emissions. “The financialsector should play an active role in providingfunds， investment and loans for those firmsthat plan to succeed in net zero transition，” hestressed.

China’s Green Finance Moves

Carney lauded China’s role in the world’s greentransition with its massive investment in cleantechnologies and their export to other countries，as well as building a financial system for greentransition. He referred to the green finance policiesin the Guangdong-Hong Kong-Macao GreaterBay Area in south China， calling them impressive.

However， he said the world still needs trillionsof dollars of additional investment. It is thereforenecessary to establish more green financialcenters and develop international common standardsto allocate funds to places in need.

He also stressed the role of clean energy. Toachieve the climate goal set at the Paris Agreement，it is essential to invest in clean energy.Fortunately， investment in green technologies，such as wind energy， photovoltaics， batteries，energy storage and electric vehicles， has seen adramatic boom. Eight years ago， the investmentin new energy technologies was US $500 billionevery year globally. In 2023， the figure soared toUS $1.8 trillion， almost four times as much， withChina contributing 45 percent of it.

However， the International Energy Agency hascalled for still more， an annual investment of US $4.5 trillion in green energy.The huge gap between demandand reality highlightsthe urgent need for costeffectiveproducts， advancedtechnology and effectiveresource allocation. And thisshortage mainly exists indeveloping countries， whichurgently need financial andtechnical assistance from theinternational community toachieve low-carbon transitionand tackle the challengesbrought by climate change.

Technological achievements， such as China’srapid development of photovoltaic power， havegreatly reduced the cost of clean technology andenergy， and provided more services to the internationalcommunity. “We need to reduce thecost of these technologies and expand productioncapacity，” Carney said. “What the financialsystem should do is transfer funds to enterprisesand individuals in need to help them develop andpurchase these technologies.”

A Greener Belt and Road

In October， Beijing hosted a second event todiscuss sustainable finance， bringing together participants from over 150 countries and regions.The SWIFT （Society for Worldwide InterbankFinancial Telecommunication） InternationalBanker’s Operation Seminar 2024， or SIBOS 2024，also known as the “Olympics” of the financialworld， was held on the Chinese mainland for thefirst time.

The Bank of China （BOC） spearheads China’sopening up in the banking sector. It is the firstfinancial institution in China to open SWIFTservices， and the first Chinese participant atSIBOS’s annual meeting. BOC Chairman GeHaijiao said China’s industrial structure upgradeand technological innovation opens up a “blueocean” for financial institutions， a new marketwith little competition or barriers for innovators.The rapid growth of demand for assetmanagement services will bring huge marketopportunities， and China’s overall green economicand social transition need more diversifiedfinancial products and services. Moreover，the internationalization ofthe renminbi will enrichthe global monetary systemand provide more optionsfor the financial market，with better conditions andbroader space for foreigncompanies in the Chinesemarket.

In June， BOC issued a batch of sustainable developmentbonds to facilitate projects under theBelt and Road cooperation. It said this was thefirst such series in the world， with a total scaleof US $940 million， to be used to build projectsalong the Belt and Road routes. Funding raisedfrom the bonds will be provided to green projectsand those for the wellbeing of the public， whoseloans have been approved by BOC. They include aproject in Hungary， the first European country tojoin the Belt and Road， to manufacture batteriesfor new energy vehicles; a wind energy project inUzbekistan; and a sustainable fishery project inChile.

In recent years， developing countries havehigher demand for investment in green development.It is through such green or sustainablebonds that China has been leveraging privatecapital to support the high-quality developmentof countries along the Belt and Road. Accordingto a green bond report issued by the ClimateBonds Initiative， an international non-profit，China was the world’s largest green bond issuancemarket for 2022 and 2023.

Finance plays a key role in promoting fair andinclusive climate transition. Transitional financialtools are often used for climate mitigation andadaptation projects. Financial and fiscal incentivepolicies in the transitional financial systemwill promote more capital investment and supportglobal climate change without soaring costsand risks.

“The combination of the insights from theFinancial Street Forum and the opportunities atSIBOS will support real progress toward a moreintegrated and resilient global financial system，which will help to shape a sustainable future thatbenefits everyone，” Carney said.