Supporting Green Private Equity Investments in China

The World Bank’s Board of Executive Directors approved a US$200 million loan today to support the establishment of a Green and Low-Carbon Investment Fund, which will help demonstrate best-practice environmental standards and help catalyze private capital and expand the supply of equity financing to green businesses and projects in selected regions of China.

China’s rapid economic growth over the past four decades has been accompanied by extensive environmental degradation and an increase in pollution levels. The transition towards greener growth will require mobilizing large amounts of financing. While China’s financial sector has deepened rapidly in recent years, privately-owned firms and small and medium enterprises often lack access to equity to finance their expansion. These constraints are even greater for green, innovative businesses.

Once established, the national-level Green and Low-Carbon Investment Fund will develop and demonstrate best-practice environmental standards in a China context, and will help catalyze additional private capital from domestic and foreign institutional investors, providing much-needed long-term equity financing to smaller private green innovators and qualified green projects.

“Public capital is at times needed to catalyze private investments, for example where public seed capital can help demonstrate new environmental standards or demonstrate high-risk high-reward investments that help create global public goods. The Fund will not only provide such public seed capital to finance green equity capital, but will also implement best-practice green investment standards, thereby helping  set a benchmark for the emerging green private equity market in China” said Martin Raiser, World Bank Country Director for China, Mongolia and Korea.

The Fund will be independently managed by a competitively selected fund manager, responsible for all investment decisions. The fund manager will follow best practice standards in screening, appraising, monitoring and evaluating green investments and will apply the World Bank’s environmental and social safeguards policies to its entire portfolio.

The project is aligned with the Chinese government’s increased environmental commitments under the 14th Five Year Plan, and China’s commitment to peak carbon emissions before 2030 and achieve carbon neutrality by 2060.

The World Bank Group, the largest multilateral funder of climate investments in developing countries, has not financed a new coal-fired power plant since 2010 and has no active coal-fired power generation in its pipeline. The Bank is also supporting countries transitioning from coal for affected communities.