Background

As the world’s largest manufacturer of solar panels, wind turbines, batteries and EVs, China is well placed to help deliver low-carbon technologies to EMDEs as part of its Belt and Road Initiative (BRI), one of the largest outbound infrastructure and investment initiatives in history. As the cost of these technologies falls, they are increasingly preferred for economic as well as environmental reasons. A surge in BRI projects deploying these technologies would be in line with China’s September 2021 pledge to “step up support for other developing countries in developing green and low-carbon energy and not build new coal-fired power projects abroad".

Main point 1:the low-carbon technologies

Many low-carbon technologies, from solar and wind power to battery storage and EVs, are technologically feasible and commercially viable. Deploying these to EMDEs should be an important objective of the BRI. Host countries can provide conducive policy frameworks to support the development of “bankable” projects.

Main point2: Financial sector players and financial instruments

Financial institutions are coalescing around frameworks such as the Task Force on ClimateRelated Financial Disclosures (TCFD) recommendations to measure, manage and disclose their climate risks. Many leading financial institutions are also setting targets through initiatives such as GIP and the Glasgow Financial Alliance for Net Zero (GFANZ) to reduce their exposure to carbon-intensive sectors. These commitments are signalling clearly that financing will shift from brown (fossil fuel-burning) activities to green activities over time. 

Main point3: the policy environment 

Green finance mechanisms to support infrastructure financing, such as green bonds or green loans, have grown rapidly over the past decade but remain at a nascent stage. Governments and regulators will continue to work on the alignment of standards and taxonomies while instruments such as blue bonds and transition bonds are emerging to address thematic areas. Significant innovation is still needed, however, to transform sustainable infrastructure into a mainstream asset class – especially for projects in EMDEs.