A few days ago I was at China’s annual EcoForum conference, far away in the South Western city of Guyiang, where tower blocks are sprouting like mushrooms across the rolling hills. I was a speaker at a Green Finance Roundtable, alongside Ma Jun, the newish chief economist at the People’s Bank of China - what a star he is! - as well as Mark Halle of IISD, Huang Jianhui, VP of Finance Research at the China Development Bank, and others.
Ma Jun gave an amazing speech about 8 green finance measures he felt China needed. He reeled them off as multiple TV news channels filmed and the cream of China's finance community listened:
- Expanding carbon markets (they’re well and truly underway in China).
- Green bonds (yes, he'd totally won me at that point). He also said that "to distinguish green bonds from other bonds … they should have lower financing costs and greater support from the government, such as tax exemptions”. I had to resist the urge to start screaming like a teenage Beatles fan "Ma Jun, Ma Jun, Ma Jun".
- Green banks, with a special mention of the useful example of the UK’s Green Investment bank. It would be finance by green bonds! Oh yes!
- Green insurance.
- Green education of financial product consumers.
- Environmental risk disclosure.
- Quasi-public environment cost analysis that people can interrogate.
- Green Investors Network (perhaps modelled on the Investor Groups on Climate Change that are board members of the Climate Bonds Standard?)
Remember, this is a chief economist at China’s central bank talking!
Part of his rationale for green finance is that he believes there is currently little incentive for green investment in China, so polluting projects enjoy an oversupply of capital while environmentally friendly ones are faced with a severe capital shortage. Yet China government plans calls for a whole range of green growth, including tripling solar energy generation by 2017.
Ma Jun also agreed with the Climate Bonds proposition that green bonds can help local government financing platforms deal with the problem they have of average loan durations of around 3 years, yet it may require more than 10 years to service debt. This sort of mismatch means significant volatility risk in China's financial markets. Longer-dated green bonds will help mitigate that risk.
I’ve already started on setting up a Ma Jun Fan Club website.