Tuesday, January 22, 2013

New Report on China Development Bank

Adina Matisoff has come up with another hard-hitting look at Chinese development bank's overseas financing for Friends of the Earth and BankTrack: China Development Bank’s overseas investments: An assessment of environmental and social policies and practices. Here's a synopsis of the report, from a blog posting by Michelle Chan: 
"As one might guess, CDB is a major financier of natural resource and infrastructure projects abroad. The report dives into four examples of CDB’s overseas transactions: the Alberta tar sands, the Shwe oil and gas project in Burma, Reliance Power’s ultra mega coal power plants in India, and Asia Pulp and Paper’s notorious logging activities in Indonesia. As evidenced by these ‘Dodgy Deals,’ CDB’s portfolio is as full of environmentally and socially risky projects as any of its international peers. But critically, CDB’s environmental and social policies fall short compared to its competitors.
However, a new China Banking Regulatory Commission Directive offers some hope. A few years ago, the CBRC launched an impressive new policy, the Green Credit Policy, which essentially requires Chinese banks to ensure that large, environmentally risky projects are in compliance with environmental laws before the banks lend them money. The policy was the first of its kind in the world, but it was really oriented towards ensuring that projects in China were compliance with Chinese law. But in February 2012, the CBRC issued a new Directive to the Green Credit Policy, which specifically instructs Chinese banks to adhere to international environmental and social financing standards in overseas transactions.

The new directive provides an opportunity for communities around the world affected by Chinese bank-financed deals -- such as the massive Rio Blano mine in Peru or the Merowe dam in Sudan -- with a leverage point to stop or improve an environmentally and socially sensitive project.The Directive also offers sustainable finance advocates both in China and internationally a chance to promote the implementation of this pioneering new banking regulation, and to work with a new group of globally important banks.
Finally, it allows those promoting international social, environmental and financial norms -- such as the Extractive Industries Transparency Initiative on revenue transparency, the Equator Principles for project finance, and the UN Declaration on the Rights of Indigenous Peoples --  to enlist the participation of powerful Chinese players that have been generally absent from these initiatives."
It's high time that the big Chinese banks step up to the plate on the Equator Principles. A hat-tip to Richard Carey.

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