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Chinese banks: time to go green

International banks are realising it is in their interests to adopt world-class environmental lending policies, argues Michelle Chan-Fishel. If Beijing is to secure international goodwill, Chinese financiers must do the same.
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Under Beijing’s “Go outward” policy, Chinese companies are actively purchasing timber, mineral assets, oil and gas around the globe. But since western companies have already acquired so many of the world’s most lucrative and accessible natural resource concessions, Chinese companies have often been forced to seek out riskier opportunities in politically unstable or frontier areas. As a result, Chinese companies are now involved in developing some of the world’s most environmentally and socially sensitive projects.

Chinese companies are quickly generating not only same kinds of environmental damage but also the community opposition that Western companies have spawned around the world. For instance, in Zambia’s recent elections, the leading opposition candidate ran on a platform that tapped local anger over unsafe working conditions in Chinese-owned mines.

Over the past several years, international NGOs have started to pressure not only companies, but also the banks that back them. As a result, international banks have developed environmental and social financing standards, particularly for large development projects such as dams, pipelines and oil projects. 

While these standards and their implementation are not as robust as they could be, they can be useful in many ways. Minimum standards can make it more difficult and expensive – if not impossible – for the most egregious projects to receive funding. They can also create a strong incentive for companies to be responsible by designing more socially and environmentally benign projects. Some bank standards may even require companies to listen to community concerns as a condition for receiving loans. For example, the Equator Principles, a set of project financing standards endorsed by over 40 banks, require companies to consult with affected communities before a project is built, and to establish grievance mechanisms afterwards to address the concerns of people who may be affected. 

While the Equator Principles have attracted a lot of support, they do not seem to have attracted the interest of Chinese financiers. Moreover, unlike some international banks, Chinese financiers currently lack standards on other issues such as mining, forests, and climate change.

Based on publicly available data, only one Chinese bank China Development Bank has adopted its own environmental financing standards. China Export-Import Bank (Chexim) reportedly has environmental policies, but they have not been made public. Only the Bank of Shanghai has endorsed the United Nations Environment Programme’s Statement by Financial Institutions on Environment and Sustainable Development, and only Shanghai Pudong Bank has issued a corporate responsibility report. No Chinese banks have adopted the Equator Principles on project finance. 

But Chinese banks are still involved in environmentally risky deals. For example, Chexim, one of the country’s biggest overseas lenders, has funded the Merowe dam in Sudan, which will relocate farmers from the fertile banks of the Nile to barren desert, displacing around 50,000 people. It is also funding the Nam Mang 3 dam in Laos, which will displace about 15,000. Chexim finances China Metallurgical Construction Company’s Ramu nickel mine in Papua New Guinea, which employs the environmentally destructive practice of submarine tailings disposal. This technique relies on the ocean dumping of mining waste, which often contains heavy metals and can be harmful to human and environmental health. The mine been described by the New Guinean National Fisheries Authority as an “unsustainable project socially, economically, and environmentally [that] cannot be allowed to proceed.”



Chinese workers at Merowe Dam
photo by David Haberlah

Recently, Chexim has agreed to finance the China National Machinery & Equipment Import & Export Corporation (CMEC), which plans to develop an iron ore mine in the Belinga region of Gabon. This region is located in the Central African Rainforest, the second largest rainforest in the world. According to Greenpeace, in as little as five to ten years, Africa's apes, gorillas, and chimpanzees will disappear as forest habitats are degraded or lost. The Belinga region in particular has been identified as a “Priority Important Area” in the Regional Action Plan for the Conservation of Chimpanzees and Gorillas in Western Equatorial Africa. At one time, the area was not considered under immediate threat, because the lack of infrastructure made mining commercially unfeasible. But with the backing of Chexim, CMEC is also going to build a port, rail system and two dams.

Another major Chinese bank, China Development Bank (CDB), has traditionally focused on domestic financing, but is now internationalising its portfolio. CDB is one of the few Chinese banks with a public environmental-financing policy, but it seems to be limited to ensuring compliance with environmental laws in China. CDB finances oil palm plantations in Borneo (Indonesia), home to some of the world’s most biologically important tropical moist forests and the habitat of endangered orangutans, and will likely be at the centre of deals between China and Russia to develop dams, pulp mills and oil pipelines in the environmentally-sensitive Russian far east.

Some international observers have already started to sound the alarm about Chinese banks. 

For example, many Equator banks rightly complain that the lack of Chinese environmental banking standards creates an unfair playing field. But at the same time, many of them are buying significant shares of Chinese banks and have even joined the boards of these firms – Royal Bank of Scotland owns close to 20% of Bank of China and Bank of America could own up to 19% of China Construction Bank. With this level of involvement, they have the ability to introduce environmental financing policies at Chinese banks, and should not just complain.

World Bank president Paul Wolfowitz recently expressed concern that Chinese lending, which is set to surpass the World Bank lending in Africa, could worsen African debt. What he has not acknowledged is that the debt crisis was largely created by careless World Bank lending in the first place (which largely benefited Western companies). Wolfowitz should not be surprised that Africa is turning to China for aid, since Western governments have not lived up to their own promises to cancel debt and extend more aid and concessional loans to Africa.

While NGOs should encourage Chinese companies and banks to adopt better environmental and social practices (for the sake of all affected communities – both inside and outside China), they must not ignore the role of Western consumption. For example, a significant amount of the timber that China imports from countries like Cameroon, Burma, and Russia goes directly into producing bookcases, furniture, picture frames and other goods that are then exported to the rest of the world.

But ultimately, calls from the international community may not matter. Chinese banks will likely realise that it is in their own best interests to adopt world-class environmental and social lending policies. Not only will it help them manage credit risk and make better loans, but it will also help Chinese companies preserve their social license to operate by acting more responsibly. If securing access to natural resources is a key priority for Beijing, then securing international goodwill and promoting a harmonious society will also be paramount.

Michelle Chan-Fishel is program manager of the Green Investments Program at Friends of the Earth – US in San Francisco.

Home Page photo by RanBans


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Default avatar
匿名 | Anonymous

英国合作银行的生态政策

或许英国合作银行的道德政策值得借鉴(政策内容参见该行网站)。

将一个可持续的未来置于我们道德政策的核心
自1992年我们引入道德政策起,我们秉承了这样的原则,即确保您的财产不被投资于那些不必要的破坏着环境的公司。

而从那以后,我们越来越清晰地认识到我们的生活方式有多么不可持续。我们正在耗竭不可再生的自然资源,例如化石燃料,消耗的速度远远超过了我们寻找替代品的速度。我们正在耗竭可再生资源,例如木材,消耗的速度远远超过了他们的再生速度。我们还在不断排放地球和大气层无法吸收和平复的非天然的化学物质。

我们对这些严峻事实越来越清晰,也对我们每个人在避免灾难的进程中必须扮演的角色也越来越明了,这便将我们引向了1996年的《生态目标宣言》,而如今,通过承诺不对根本性违反原则的商业活动方进行投资,宣言的主要原则被囊括到了我们的道德政策当中。

最近的一次道德政策匿名调查显示,参与的客户认为不应投资于任何以如下活动作为核心业务的企业或组织:

加剧全球气候变化及酸雨等问题的化石燃料开采或生产 - 70%
加剧臭氧层损耗或会在自然界积聚的非天然化学物质的生产 - 88%
不可持续的自然资源利用方式,如清除性伐木等造成森林面积下降的方式 - 94%

在此基础上,我们还努力对参与如下活动的商业企业给与资助:

回收及可持续的废品管理 - 98%
可再生能源及能源有效利用 - 98%
可持续的天然产品及服务,含木材及有机产品 - 97%
追求生态可持续性的活动 - 97%

UK Co-op Bank Ecological Policy

Perhaps it is worth quoting from the Ethical Policy of the UK Co-operative Bank (which can be found on their web site).

Putting a Sustainable Future at the Heart of Our Ethical Policy

Ever since we introduced our Ethical Policy in 1992, we have made it a principle not to invest your money in companies needlessly damaging the environment.

But since then, it has become increasingly clear that the way we live now is not sustainable. We are using up non-renewable natural resources, such as fossil fuels, much faster than we are finding alternatives for them. We are using up renewable resources, such as timber, much faster than they can be replaced. And we are constantly pumping out all kinds of unnatural chemicals that the Earth and its atmosphere are unable to absorb or make safe.

Our growing recognition of these stark facts, and of the part we all have to play in averting catastrophe, led in 1996 to the introduction of our Ecological Mission Statement, and we are now incorporating its key principles into our Ethical Policy, by making a commitment not to invest money in businesses whose main activities are fundamentally at odds with our principles.

Customers who responded to the most recent ethical policy ballot agreed that we should not invest in any business or organisation that, as a core activity, relies on:
The extraction or production of fossil fuels which may contribute to problems such as global climate change and acid rain - 70%

The manufacture of unnatural chemicals with may contribute to problems such as ozone depletion or which may accumulate in nature - 88%

The unsustainable harvest of natural resources such as timber clearance which may lead to deforestation - 94%

Furthermore, we will seek to support businesses involved in:
Recycling and sustainable waste management - 98%

Renewable energy and energy efficiency - 98%

Sustainable natural products and services, including timber and Organic produce - 97%

The pursuit of ecological sustainability - 97%

Default avatar
匿名 | Anonymous

这文章很有趣。它谈到以往忽视的一重要话题:西方世界的消费在促进廉价商品的生产。“完美的市场”没有考虑到环境的问题;消费者在对两种价格的选择时也没有考虑到他们的选择对环境的影响。

然而,我不同意作者的乐观结论。消费者从西方制定的标准中作出理性的选择。他们的选择又反过来影响市场。我相信,只有银行发现对它们有利时,它们才引入这些标准。

This is a very interesting article that touches upon one core issue often neglected in the discussion: Western consumption fuelling the drive to ever cheaper goods. The 'perfect market' does not consider environmental standards. And neither do consumers when given the choice between two price tags.
However, I disagree with the author's concluding optimism. Western imposed standards, for all their controversy, are the only way for consumers to make ethical choices, which may then influence the market. Only then, I believe, will banks find it in their interest to impose these standards on themselves.

Default avatar
匿名 | Anonymous

北京真的在建立国际商誉吗?

我没有被"中国妄图通过金融机构实施环保财政标准来帮助建立自己的国际商誉”这一观点说服。毕竟,中国在使经营情况和贷款情况紧密相关的国际金融机构的利益受损。这些贷款和各种各样的经济、社会、政治,有时会和环境问题有关。而且,中国的“第三世界冠军”的国际形象让他能够在一些敏感地区,如:苏丹、津巴布韦、缅甸实行可获利的投资。这说明北京缺乏对国际建议的重视。

Does Beijing really seek international goodwill?

I am not convinced that China wants international goodwill through ethical lending practices. After all, it undermines international financial institutions, who attach stringent conditions to their loans. These loans are linked to various economical, social, political and at times, environmental issues. Further, China's international image as 'Third World Champion' has allowed it to pursue lucrative investments in sensitive areas, for example in Sudan, Zimbabwe or Burma. This suggests to me that Beijing has in fact scant regard for international opinion.

Default avatar
匿名 | Anonymous

银行改革?

新闻指出~1)改革并没有完全切断政府与商业银行之间的联系。只要政府仍持有商业银行的大多数股份,激励问题就无法得到解决。对尚处在改革阶段的商业银行,国外战略投资者仍然心存疑虑,政府无法向他们保证将来不会再次调整国有商业银行的资本结构;(2)由于市场进入壁垒,银行业内的竞争受到限制;(3)对于大多数商业银行来说,破产并不可行。如果它们陷入财务困境,毫无疑问政府将再次出面帮助它们渡过难关;(4)商业银行的维持与运转仍然依赖于经济快速增长带来的流动资金。是否会影响中国银行业的发展???

Banking reform?

The news article points out that 1) reform has indeed not entirely severed ties between the government and commercial banks. As long as the government still holds the majority of shares in the commercial banks, encouraging the problem, there's no way it can be solved. In reality, foreign strategic investors are still skeptical about commercial banks at the reform stage. The government has no means by which to guarantee them that it will not in future adjust the capital structure of the state-owned commercial banks. 2) Due to barriers to entering the marketplace, competition in the banking sector has been restricted. 3) According to the large majority of commercial banks, bankruptcy is just not feasible. If they face financial difficulties, undoubtedly the government will once again offer help in weathering the storm. 4) The preservation of commercial banks and their operation still depends on the money flow brought by rapid economic growth. Will this influence the development of China's banking sector or not?