Investors need to be more green

Institutions pouring money into dirty economy: UN

China should ensure that its institutional investors are making environmentally friendly decisions, as the development of the country's financial system is now at a nascent stage with more efforts needed on green development compared with its mature Western counterparts, experts said on Wednesday at a seminar held by the United Nations (UN) in Beijing.

Tomas Christensen, New York-based ambassador and senior advisor for partnerships at the UN, said that he hopes China and the US could make more joint efforts to urge global financial institutions to make more environmentally sensitive decisions.

Profit-driven and cash-rich institutional investors, such as insurance companies and pension funds, poured the bulk of their money in non-renewable energy-based yet lucrative industries such as crude oil processing, Christensen said. And that has to be changed since the financial sector is as well responsible for a sustainable economy, he added.

Simon Zadek, co-director of a UN report on green financial system, said at the seminar that China's main market regulators, including the central bank and the China Banking Regulatory Commission (CBRC), have the opportunity and obligation to play an explicit role in mapping out long-term plans for financial institutions to operate in a green manner.

Also, Chinese and global credit ratings agencies should consider the environment when they rate securities such as bonds and derivatives, Zadek said.

"There are opportunities for evolving China-level environmentally sensitive credit ratings and benchmarks," he said. "The fact that China has stated its interests in developing its own approach of credit ratings offers an opportunity [for the country] to differentiate itself on an environmental level."

An additional trillion dollars will be needed every year to make the world's annual $5 trillion investment environmentally friendly until 2030, according to a UN report released on Wednesday at the seminar.

Public expenditures will play a crucial role in ensuring investments are made to construct green financial systems around the world, the report said. And much of today's capital is invested in delivering the $70 trillion output from a global economy which is resource, carbon and pollution intensive, it said.

The financial market is organized in a way that encourages insurers and pension funds "to invest in a dirty economy, to invest in polluting activities," Zadek said, adding that global regulators should make efforts to change the situation.

A CBRC employee said at the seminar that the regulator is drafting corporate social responsibility rules for the banking sector. The CBRC released a guideline in February 2012 to encourage financial institutions to offer credits to environmentally friendly businesses.