TRADE & FINANCE
OVERCOMING
THE BARRIERS
TO PRIVATE
SECTOR
INVESTMENT
HELEN WONG
CEO, Greater China, HSBC
18
COP21 in Paris last year was an historic
turning point in the fight against climate
change. The job of financing the change
is as unprecedented as the agreement
itself, with the G20 Finance Ministers’
July Communiqué emphasizing the
development of green finance.
Over the next 15 years, 90 trillion
US dollars of investment is needed to
achieve the commitments made in Paris.
This equates to around RMB2 trillion
over the next 5 years for China alone to
deliver its environmental targets.
China’s commitment to reduce its own
emissions has been instrumental both
to the constructive tone of the talks and
the successful outcome of COP21 and its
G20 Presidency. As the world’s largest
developing country, leading industrial
power and biggest trading nation, China
will continue to play a central role in the
implementation of the climate agreement
in years to come.
What is already clear is that no one
sector of the economy can deliver the
investment alone. For its part, the private
sector will need to stump up most of
the capital – perhaps as much as 85
per cent. But the public sector also has
a vital role to play, both by directing the
resources at its disposal and by creating
the conditions that will unlock private
sector investment. This is evident when
we consider the basic barriers to private
sector investment in sustainable projects.
The first barrier is policy uncertainty:
Sending clear and unequivocal signals
of policy direction gives investors the
assurances they need that projects
will have long-term political support.
It also enables investors to become
increasingly activist in demanding
change, which in turn forces companies
to respond by allocating capital to
cleaner, greener operations, and
away from carbon-intensive activities.
The second barrier is a lack of
transparency and disclosure: Investors
need access to good quality information
and transparency to help them make
investment decisions. At the moment,
information is at worst unavailable and
at best not standardised, meaning