Standalone climate strategy and integration of climate in overarching strategy

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Paris alignmentReasoning
UnalignedThere is no evidence of a standalone climate strategy but a carbon neutrality action plan has been released. The overarching strategy could be stronger on climate change. A final date for full Paris alignment is missing.
Climate strategyOverarching strategy
CDB doesn’t have a standalone climate strategy but has released a carbon neutrality action plan. More detail is needed. Tackling “Green Growth” is recognised as one of the five core values.

Explanation

 

Standalone climate strategy

There is no publicly available evidence of CDB having a standalone climate strategy.

In an action plan issued in December 2021, the CDB committed a number of climate related targets.

  • A guiding principle is for green loans to account for 30% of credit assets by 2030
  • The China Development Bank is to “achieve “double neutralization” of the group’s investment and financing and its own operating carbon emissions, and will be green and low-carbon.” by 2060.  This is interpreted as meaning a 2030 peak in emissions and a 2060 neutrality target. It is not clear exactly how this will be achieved. 
  • The action plan proposes “that the Development Bank establishes ten major action systems for serving carbon peaks and carbon neutrality”. In the future, the Development Bank will build a “1+N+X+Y” carbon peaking and carbon neutral policy system. It is likely that the ‘X+Y’ refer to the policies and systems they are planning to introduce under a guiding N plan on sustainable/green finance
Overarching strategy

The China Development Bank reports some of its environmental policies and management in annual sustainability reports. The 2018 Sustainability Report states that they have promoted a green Belt and Road Initiative by “issuing green credit and bonds … to support climate change mitigation”.

CDB’s overall mission is to “enhance national competitiveness and improve people’s livelihood. Green growth is cited as one of the five core values of CDB. However, it does not provide details on what green growth means in practice or how this relates to its commitment to align to the Paris Agreement.

CDB also states that the Bank does business according to the Ten Principles of the United Nations Global Compact, which cover environmental standards as well as human rights, labour standards and anti-corruption

In 2017, CDB endorsed the Green Investment Principles for the Belt and Road Initiative. This is an opportunity to ensure that CDB investments overseas comply with basic green standards, although there is room for improvement in making these principles more stringent. A secretariat with dedicated working groups was expected to be set up by summer 2020.

In 2021, China issued the Green Development Guidelines for Foreign Investment and Cooperation which apply to CDB but are only voluntary. The main highlight of these guidelines is that Chinese enterprises should adhere to “international green rules and standards”, where those are more stringent than “host country rules”. 

In 2005, CDB became one of the first Chinese banks to establish environmental and social policies. In 2007, CDB launched a “Working plan of CDB for loans to reduce pollution and emissions”. This was aimed at shifting lending to energy savings, emission reduction and pollution prevention projects by adjusting loan structures. Environmental guidelines have been put in place and an Environment Impact Assessment (EIA) is conducted during the loan approval process. As regards energy-intensive industries (e.g. coal mining, oil and gas exploration and development, power generation and transmission, and hydropower), the environmental impact assessment needs to be approved by the relevant environmental authorities and reviewed by an independent evaluator. The CDB credit committee can reject loans for environmental reasons by exercising the “one-ballot veto” procedure, but it is unclear what standards it applies in making these decisions. It should be noted that it is unclear whether this process applies to overseas projects as well as domestic projects.

According to other research that has been conducted on CDB, environmental policies have been incorporated in CDB’s corporate social responsibility guidelines since 2007 which inform the Bank’s lending practice

Recommendation: CDB should consider putting in place a standalone climate strategy, which could be based on the regular Sustainability Reports the institution publishes.

Recommendation: CDB should also detail how its “green growth” vision will translate into operational decisions. Producing a climate-change strategy would set out how the bank’s sectoral strategies will align with its core value of green growth.

Last Update: March 2022