Sept. 6 — A report backed by the world's biggest economies called for better integration of green finance into markets globally to help pay for a range of environmental initiatives, from pollution control to mitigating climate change impacts.

Leaders of the Group of 20 countries announced Sept. 5 that they approved a Green Finance Synthesis Report that calls on countries to give clear strategic policy signals to investors. It also recommends voluntary principles be established to guide sustainable banking, and that nations support the development of local green bond markets.

“ ‘Green finance' can be understood as financing of investments that provide environmental benefits in the broader context of environmentally sustainable development,” said the report. “These environmental benefits include, for example, reductions in air, water and land pollution, reductions in greenhouse gas (GHG) emissions, improved energy efficiency while utilizing existing natural resources, as well as mitigation of and adaptation to climate change and their co-benefits.”

But it noted: “Less than 1% of global bonds are labeled green and less than 1% of the holdings by global institutional investors are green infrastructure assets. The potential for scaling up green finance is substantial.”

The report acknowledged the need to deal with challenges such as removing barriers to cross-border green investment.

“The global financial system has a major role to play in mobilizing private capital for investments in green sectors, and appropriate incentives should to be given to green investment,” Zhou Xiaochuan, governor of the People's Bank of China, the country's central bank, said in a statement.

China Reports

On Sept. 1, China issued its own policy paper that aimed to integrate green financial products into the banking, investment and insurance systems.

China issued about $18 billion in green bonds by July 2016, or around 45 percent of the global market, and is aiming to play a vital role in setting rules and procedures for green finance worldwide.

In a joint statement, the groups said China needs clear rules “to provide confidence to issuers, investors and other stakeholders” to show that there is “certainty that projects gaining access to finance through green bonds achieve the environmental benefits that the issuers claim.”

At the International Green Finance Forum in Shanghai Sept. 6, Chaoni Huang, head of business development in Asia for Trucost, told Bloomberg BNA: “China has gone from zero to hero being the largest green bond issuer. Transparency, genuine green benefits and pricing differentiation will help accelerate lower cost of capital, issuance and management for green bonds. This could apply to other asset classes too.”