In order to reach a net zero future and avert catastrophic climate change, the world’s largest industries and economies need to rapidly shift their economies onto to a more sustainable and resilient pathway. This global transition is a monumental undertaking, but it also presents a tremendous opportunity for industries and investors to secure long-term stability, avoid stranded assets, and support the green economy of the future.
China is one country that is already moving to take advantage of these opportunities, especially in the energy and agriculture sectors. Earlier this month, Climate Bonds and SynTao Green Finance joined together to host the 2024 China Sustainable Investment Forum (SIF) Week event: "Unlocking Potential Climate Investment: Transition Opportunities in the Energy and Agriculture Sectors ", as part of China SIF in Beijing.
The seminar brought together senior experts from regulators, investors, banks, research institutes and ESG service providers to explore the investment potential of China's key industries for methane abatement, such as energy and agriculture. The event focused on how China can leverage financial power to accelerate the climate transition of key industries, as well as explore and promote financing models that can effectively support the transformation of China’s industries and economy. Investors, industry experts, and thought leaders came together to discuss how to accelerate the climate transition in key industries through the power of sustainable finance.
Energy and agriculture, as major sources of non-CO2 greenhouse gas emissions, play a crucial role in achieving the Paris Agreement. Agriculture contributes 40% of methane emissions, while the energy sector is responsible for a further 35% through fossil energy production and use, as well as coal mining. Methane emission abatement not only contributes to climate change mitigation but also provides economic benefits in the form of cost savings and efficiency gains.
In his keynote address, Sean Kidney, CEO of the Climate Bonds Initiative, noted that while we have begun to appreciate the importance of methane emissions and witnessed China's recent introduction of regulations and targets for controlling methane emissions, we need to step up our efforts to meet these challenges. On the path to methane emissions reduction, we already have sufficient capital, cutting-edge science, and practical solutions that provide solid support for continued progress in key areas such as agriculture and energy. However, in order to drive emissions reductions more quickly and effectively, we still need to work to bring more capital and scientific power into these priority areas for emissions reductions.
Wenhong Xie, Climate Bonds Head of China Programme, pointed out in his speech that transition finance has been developing from a controversial topic in the past to a market consensus, and that the capital market's focus on climate transition in high-carbon sectors has increased significantly and is driving key industries to undertake climate transition in a clear and rapid pathway. He said that the conference's focus on energy and agriculture is aimed at exploring transformational investment opportunities, especially the potential for methane emission reductions. In particular, he emphasised that methane mitigation has become a mainstream issue in the investment community, attracting investor attention not only for climate change mitigation, but also for its huge economic benefits.
Xiaohua Zhang, Senior Director for China at the ClimateWorks Foundation, addressed a keynote speech on Climate Transition Opportunities for Key Industries. Additionally, Ji Gao, Director of the Energy and Nature Programme at EDF, shared his insights on Energy Sector Transition Pathways and Methane Emission Reduction Investment Opportunities.
In the Energy Roundtable Dialogue session, the participating experts discussed the key aspects and existing challenges in the energy sector in addressing methane emissions reduction, and how to provide financing for the low-carbon transition of the energy sector through financial instruments such as green financial bonds and transition bonds. Moderated by Wenhong Xie, this roundtable dialogue featured four key panelist, Zhiyu Tian, Executive Director of the Energy Sustainable Development Research Center at the Energy Research Institute of the National Development and Reform Commission (NDRC), Dr. Fuqiang Yang, Senior Advisor, Climate Change and Energy Transition Programme, Energy Research Institute, Peking University, Xiaohua Jia, Country Director, China, Asia Research and Engagement (ARE), Alfred Hui, Sustainable Finance Analyst, Second Party Opinion APAC, Moody’s Ratings
Methane abatement in the agricultural sector was also an important topic at the event. Agri-food systems are responsible for about 21%-37% of global total GHG emissions but also face considerable climate risks which make them a critical factor in both climate change mitigation and adaptation efforts. China, as a major producer and consumer of agricultural products and food and a country feeding 1.4 billion people, ought to prioritise a just and inclusive agri-food system climate transition. That’s why Climate Bonds released “Financing the climate transition in China’s agri-food systems”, a new paper laying out how private capital can bridge the financing gap in the agri-food sector and build a more sustainable and resilient sector.
Shaoxin Li, Climate Bonds China Agriculture Transitions Lead, pointed out that the current investment and financing of agri-food systems mainly relies on public capital, and that strengthening the support of social funds for agricultural systems and mobilising capital markets will be the key to breaking through the bottleneck of funding for agri-food systems. She stressed that China, as the world's largest green bond market, has raised less than 5 per cent of the capital investment in the agriculture sector. This means that the agriculture sector has more room for development in the green bond market. Over the past two years, Climate Bonds has been working to develop relevant agricultural financing standards to support market issuers and investors in better identifying green, sustainable, and transformation-related activities and projects, so as to mobilise more funds to support the development of the market.