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Chinese NGO's Green Finance
, Dec 20 2011
I believe everyone received the bank notification that encouraged people to switch to electronic bills in order to increase the banks’ environmental responsibility. However, think carefully about each bank’s daily transactions and deals that leverage large sums of money on domestic and international financial markets in cooperation with both large enterprises and governments. Couldn’t the banking industry have a much larger commitment to environmental responsibility than just encouraging their members to switch to electronic bills?
In China, Environmental Protection NGOs have already recognized that the majority of development projects affecting the environment are only implemented with the aid of financial aid of banks and the finance industry. For large-scale development projects, banking often plays a key role. In China, a rapidly developing industrial society, the endless stream of environmental pollution and the far-reaching impacts of massive engineering projects are constant reminders that better environmental accountability in the banking sector is urgently needed. Moreover, many of today's international large-scale development projects are directly funded by multinational loan financing companies. The plans to build dams along the Mekong River in Laos are one example of this. These developers will have a significant impact on the environment, very possibly leading to an ecological catastrophe, and will need to rely on large loans to complete the project. Therefore, Green Watershed has led a coalition of nine NGOs to launch a "Green Credit Advocacy" program in China. Green finance is most importantly about offering loans to projects that will manage their potential environmental impacts, supporting and financing programs that benefit the environment, and creating corresponding policies and management measures. The goal of the above-mentioned “Green Credit Advocacy” program is to advocate for, and monitor, financial institutions to ensure that they fulfill their environmental and social responsibility, as delineated in the 2007 Chinese “Green Credit” policies.
Chinese financial investments also play a vital role for many development projects in countries around the world. So having banks that are committed to green finance will further protect the ecological systems within those countries. One example of this is the highly controversial Rio Blanco copper mine in Peru, the developer of which is China's largest mineral resources provider - Zijin Mining. The Rio Blanco mine not only pollutes the water and threatens the habitat of endangered species, but also harms the indigenous people, impinging on their rights. The financing for Zijin Mining’s operations in Peru, as well as in Mongolia and Myanmar, come from five major Chinese banks.
Over the past four years, the coalition of Green Watershed and 9 other NGOs have worked within China’s banking sector to advocate for green credit policies and record the progress of green finance. Green Watershed has published three annual reports titled, “Environmental Report on Chinese Banks,” to ensure public accountability and supervision. At the same, Green Watershed has worked with more than 200 NGOs from across China to provide capacity building and training for the purpose of enhancing social accountability. Even though the Chinese Government has already issued the 2007 Green Credit Policies, there is little to no supervision of the financial sector on the part of civil society. As such, these policies have insofar been difficult to implement. On the other hand, for NGOs that have combated polluters on the local level for a long time, understanding the concepts and methods of green credit policies has allowed them to combat pollution sites at their source: the funding. Step by step, the phrase "A well-placed underdog can challenge large forces" is being realized. Financial institutions, however, remain passive and their efforts do not parallel NGOs’ consistent initiatives. Green Watershed hopes that the banking sector takes steps to publicly disclose their environmental policies and lending principles. There have already been five banks in China, including the Industrial Bank, which have engaged in dialogue with Green Watershed, and the Industrial Bank of China has also sent representatives to attend Green Watershed’s Green Finance trainings.
In addition to research and advocacy, Green Watershed also works on addressing current environmental problems, especially urging banks to increase the environmental responsibility of their operations. This summer in Luliang County, Yunnan Province, incidents of chromium pollution sparked widespread societal concern. In August, Green Watershed conducted a local investigation of the situation. At the end of August, Green Watershed wrote a public letter along with 24 other NGOs to a total of 16 banks, asking them to discontinue financial support of the three liable companies, as well as to pursue measures in the future to prevent funding polluting industries. Two banks replied that they were not currently offering credit to the three liable companies, but the other 14 banks did not reply.
In September 2011, Green Watershed sent letters to the People's Bank of China, the China Banking Regulatory Commission, the Kunming Branch of the People's Bank of China, the China Banking Regulatory Commission, and the Banking Bureau in Yunnan Province, asking them to disclose relevant environmental and financial records and reports that should be public information. The CBRC did not respond, and while the Banking Bureau of Yunnan Province said that they supported the work that Green Watershed was doing, in the end they did not provide any of the requested materials. Written responses all denied responsibility, directing Green Watershed to the Department of Environmental Protection to understand the issues. The People's Bank of China is known for their practice of not accepting letters as a way of refusing to communicate with NGOs. The last organization responded with referencing "trade secrets" as their reason for not publicly disclosing any information. This whole process resulted in little, except for announcing to China's banking sector that financial regulators, the environmental protection departments, and civil society are all focusing on supervising the operations of relevant financial organizations to ensure their cooperation with social and environmental responsibility. These groups are keeping an eye towards the future, when there will be more public involvement in these issues, and more pressure if the banking industry ignores green finance policy.
Looking internationally, green finance NGOs and initiatives have already been underway for many years. In 2005, while studying in the United States, I participated in a protest along with ten other mathematics students against a group of banks that were financing environmentally destructive behavior. Today, the campaigns of International NGOs are increasingly advanced and influential. In recent years, the Rainforest Action Network (RAN) protested and exposed a number of large U.S. banks that claimed to be concerned about climate change, but in reality, the banks were heavily subsidizing the coal industry. In 2007, a union of organizations demonstrated their strength by protesting Citibank because it is one of the most powerful financial conglomerates and supporters of coal power in the world. Citibank not only underwrites the most bonds for U.S. electric companies, but also supplied billions of dollars to the MTR Corporation, whose open pit mines have caused severe environmental problems and destruction. Open-pit coal mining requires completely stripping everything above ground level, felling entire areas of forest, and leading to habitat, species, and water damage. This year, the Rainforest Action Network has been at the frontlines, from the street to peoples’ homes, mobilizing tens of thousands of Bank of America members to close their bank accounts in protest of Bank of America’s involvement in funding the U.S. coal industry. Rainforest Action Network says that even though Bank of America, along with six other large U.S. banks, signed the "Carbon Principle" in 2008, a commitment to address the problem of climate change within the U.S. electricity industries. But in fact, even after signing the principle, these banks still provide and underwrite loans for more than half of the U.S. coal industry. As such, it is clear these banks have yet to take the carbon principles seriously.
In Britain, the World Development Movement (WDM) along with Amnesty International, the Scottish Friends of the Earth, and other human rights and environmental groups joined together in 2010 to protest the Royal Bank of Scotland’s (RBS) funding of companies that blatantly disregard human rights and environmental protection. One such company is E.ON energy company, which builds coal-fired and gas-fired power plants throughout Europe, and another is the Trafigura Group which conducted large-scale dumping of toxic waste in Côte d'Ivoire. The coalition of British and Scottish groups together created the “RBS Dirty Finances Map” online, and also organized protests in the streets.
In the future, Chinese environmental NGOs will have many challenges to face. Foremost of which is achieving communication between the banking and NGO sectors that is both balanced and respectful. Increasing public awareness and concern for green credit is yet another challenge. These are the types of the difficulties that must be overcome in developing green finance practices in the future. Over the past couple of years, though, Chinese environmental NGOs have already made an impact on the banking sector with just a handful of staff and meager funding. I believe that in the future, civil society will have more power to promote and monitor green finance, as well as hold the banking sector accountable to standards of environmental and social responsibility.
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