(HONG KONG) When Dr Ma Jun was hosting a conference in Beijing more than a decade ago in 2013, he noticed that many participants were coughing incessantly.

At one point, the coughing became so violent that it drowned out his own voice. He realized that this was due to the smog that enveloped the eastern part of China, where the air pollution index was several times higher than the levels recommended by the World Health Organization.

“So it was a very big shock, at least to myself, because I was thinking about what we’ve done in the financial system, particularly in investment banking. What we have done over the past decades is to mobilize financial resources to support polluting industries, and we have channeled so much money that has allowed them to make a lot of money,” said Dr. Ma , who later became chief economist of the research center. office of the People’s Bank of China (PBOC) between 2014 and 2017.

Many of these large emitters, including companies in the steel, cement, petrochemical, oil, gas and coal sectors, were among the most profitable companies and made “too much money” at the time, said Dr Ma, speaking to reporters on January 1. Tuesday, October 29, at a conference organized by Hong Kong public policy think tank Civic Exchange. The investment bankers who structured such deals became very profitable themselves.

Realizing that the way financial systems were designed was problematic in that it allocated resources to the wrong sectors and activities, he set about developing a national green finance policy framework at China’s central bank.

A decade later, China has become the world’s largest green loan market.

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With the maturation of the green finance ecosystem, Dr Ma said there is now a need to move towards bridging finance, which, once again, involves channeling capital to these large emitters, but in the aim to decarbonize their businesses.

This would involve establishing transition taxonomies for all major economies, not just China. From there, it will also be necessary to develop more bridging finance products, which are still in their infancy in the market.

Despite the progress made by the world’s second largest economy in this area, China remains the largest emitter of greenhouse gases in the world, surpassing the United States in 2006. Its emissions per capita are, however, lower than those of the United States. and other developed markets.

Given geopolitical tensions between the two countries, China – and sometimes other fast-growing emerging economies – has often been vilified in climate change debates despite its progress.

The latest measures taken amid these growing tensions include increasing tariffs on electric vehicles imported from China to 100% and proposing to ban automotive hardware and software made in China.

To address these geopolitical complexities, both sides are attempting to define climate finance focus areas on which they can collaborate. Dr. Ma recently led a Chinese delegation comprised of representatives from business, industry, academia and think tanks, to engage with his American counterparts.

“The idea was put forward that if so many areas can’t be collaborated on – for example artificial intelligence, biotechnology… can we focus on climate change? If they think in the climate space (and they can’t collaborate on) electric vehicles… for whatever reason, then we can focus on other aspects of green,” he said. declared.

What the representatives managed to land on was the circular economy – a non-politicized and less sensitive area of ​​climate change that both sides can collaborate on. This includes food waste management and plastic recycling.

However, the white list of acceptable areas of collaboration – which is being worked on – turned out to be “narrower” than initially hoped, Dr Ma noted.