Green Finance Initiative: Greening the Belt and Road 2017

The Belt and Road initiative (BRI) is an ambitious and expansive opportunity to address Eurasian infrastructure needs to build future prosperity. The financing and delivery of projects across such a diverse set of countries and economies holds both opportunities and challenges. There is a match between Belt and Road projects and green financing to mitigate long-term environmental effects. COP21 commitments will require vast investment in green infrastructure, and the public sector cannot be solely relied on to provide this. Developments in the green finance sector will align closely with BRI finance requirements - harmonising the existing range of standards and principles to define a green BRI investment will be essential. A harmonised green definition will support efficient public and private investment by lowering costs of capital, increasing transparency, developing commonality in investment criteria and ensuring effective transitional finance. Greening the Belt and Road is a critical path to the initiative’s success. This paper reviews the benefits of a pan-BRI country approach for financial and environmental sustainability. It highlights the role and importance of Multilateral Development Banks (MDB’s) to cover early stage risks, and the vital need for them to crowd-in private capital. Scaling up risk mitigation products and expanding participants, including geopolitical risk, and standardising green finance standards will create clarity and focus for investors. Our proposed goal is the eventual creation of a market for green BRI financial instruments, which would result in more opportunity to price BRI projects at all phases, and lower financing costs. As an accelerator, the paper recommends the establishment of a BRI Green Investor Alliance to take forward more detailed work on making Green investment in the BRI more efficient.

Reference: link