Ma Jun: How Green Finance Supports Green Building, Forestry and Green Agriculture

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At the 2018 Green Finance Forum in the Annual Meeting of the Ecological Civilization Guiyang International Forum(in Gui’an New Area) on July 6th, Ma Jun, the director of the Green Finance Committee of the China Society for Finance and Banking, and the Director of the Center for Finance and Development Studies of the National Finance Research Institute of Tsinghua University made three suggestions on how the green finance industry in Guizhou Province supports green building, forestry and green agriculture.

First, green finance supports green building. Experts from the World Bank estimate that buildings and infrastructure contribute to 70% of global carbon emissions. In fact, the energy consumption of buildings is also a major source of air pollution. One of the key global responses to climate change is to implement strict green requirements and high low-carbon standards for new constructions. Gui’an, as a nationally assigned New Area, will have a substantial investment in new construction and infrastructure projects, and have the opportunity to gain valuable experience of how green finance supports green building and green infrastructure.

Ma Jun believes that the first step to be taken in the New Area is to mandate all buildings to meet a green standard. New government buildings should be built in accordance to the highest green standard immediately, existing buildings can be retrofitted to the same standard in stages. In China, the Ministry of Housing and Urban-Rural Development has required that 50% of new constructions should meet green standards in five years. Gui’an, as the New Area, shall meet higher requirements and the implementation of the standard shall be faster. The second is to convert green building standards into green finance standards. Green building standards and building materials standards that green finance supports need to make a clear statement that green building standards are included in financial guidelines such as green credit standards and green security standards. Further there should be corresponding incentive mechanisms. The third is to support the development of green building through green building insurance. Green building is facing major issue with buyers not confident with the constructors’ claims made to have the energy consumption and emissions reduced. Financial innovation in green insurance can help provide confidence in these data gaps. Large insurance companies can provide confidence to buyers that constructions built by green developers indeed reduce energy consumption, water consumption and meet other emission reduction standards, thus green buildings can be more attractive and easier to sell.

Second, use forest carbon sinks in financing. We must promote the development of forestry through green finance, and make the innovation a feature and a highlight of the pilot Guizhou Province. The forest coverage in Guizhou is a considerable size, playing a role of a pair of “lungs” in the ecological environment. If we want forests to create economic benefits and transform into financial resources, we should make full use of carbon sink mechanisms (such as recommending national carbon emission trading markets to grant forestry carbon sinks a separate offset of emissions reduction in order to ensure the demand for forestry carbon sinks). Forests can reduce carbon dioxide, which can be sold in the carbon trading market for carbon benefits. If it is well planned, forestry carbon sinks can be used as a mortgage to loan money from banks, or to issue green securities in bond markets. If carbon sinks become a financing tool, forestry companies will have an important new way of funding. Of course, this requires a pilot trial. The national authorities may not have the time and resources to execute these initiatives. The local communities can initiate such plans and get support from national authorities and carry out pilot projects.

Third, explore innovative ways for green finance to support green agriculture. This is a promising direction for the green finance development in Guizhou, and also an opportunity to incorporate poverty alleviation and green development. The development of green agriculture faces a number of challenges and opportunities. First, green or organic agricultural products have not yet won recognition among consumers. A variety of green and organic products are sold in supermarkets with cheap prices because consumers are not convinced that they are truly organic, green and safe products. If they are trusted organic products, the price can be four times higher than that of the ordinary agricultural products. The truly effective standards for green and organic agricultural products must be a nationally regulated standard, not a local, a company’s or a vendor’s own standard. Second, assuming that standard nationally regulated standard is developed, it is also necessary to collect inspection data of the products, including pesticides and heavy metal residues. The data should be authenticated, and disclosed. The data must be reliable and accepted by consumers on an entrusted platform that would not be tampered with. Guizhou, a big data innovation province, can consider how to use the Internet of Things (IOT), big data, artificial intelligence (AI), blockchain and other technologies to solve the problems of green agricultural products’ data collection, certification, labeling and transmission. Third, green agricultural products can also gain recognition through third-party assurance and solve the problem of credibility through quality insurance. For example, large insurance companies can guarantee that the chemical residues of the green and organic products do not exceed the permitted standards. With these standards, certifications, labeling and guarantee mechanisms, loans and other financial instruments would be able to support the production of entrusted agricultural products.

Of course, green finance can start with supporting some of the more easily recognizable green agricultural projects before developing a complete standard and certification system. For example, if an agricultural project uses organic fertilizer instead of traditional fertilizer, it should be supported by a relatively favorable green agricultural loan.

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